A Cameroon-flagged tanker known to have transported Iranian oil has recently been registered for demolition. This marks the first time a supertanker has been registered for demolition in over two years. This event is seen as a potential consequence of increased scrutiny on vessels involved in transporting sanctioned crude oil, reports The Financial Post.
Rare Event
The 24-year-old VLCC has been sold to an Indian scrapyard, marking the first significant scrapping of a VLCC since late 2022. This decision comes amidst a period of increased demand for tanker vessels to transport oil from sanctioned countries like Russia and Iran.
The vessel was part of the “shadow fleet,” a group of older vessels involved in transporting oil from sanctioned countries. However, the recent tightening of Western sanctions on these vessels has increased uncertainty and risk for operators. This, combined with weakening oil demand and declining tanker rates, may have contributed to the decision to scrap the vessel.
The scrapping of the vessel is a significant event, as it signals a potential shift in the market. The rise of the “shadow fleet” has kept older vessels in operation, but increased scrutiny and market pressures may lead to more vessels being scrapped in the future.
Quick Procedure
David Welch, chief economist at Vortexa, believes that the current weak market conditions, characterized by stagnant demand and increased geopolitical risks, necessitate increased scrapping of older VLCCs.
The inclusion of vessels on the OFAC blacklist significantly reduces their scrap value due to the increased risk associated with their handling. This has discouraged mainstream shipyards and dealers from acquiring such vessels.
The recent wave of US sanctions targeting individual vessels involved in Iranian crude oil transport has expanded the “dark fleet” of sanctioned vessels, further impacting market dynamics.
The impact of these sanctions on the VLCC market is significant, considering that the volume of sanctioned vessels added to the dark fleet exceeds China’s monthly consumption of Iranian crude.
The outlook for 2025 remains uncertain, with the incoming Trump administration signaling a continuation of a “maximum pressure” campaign on Iran, which could further intensify sanctions and negatively impact the VLCC market.
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Source: Financial Post
