The limited availability of tankers in the “dark fleet” during February resulted in a 37% month-over-month decrease in Iranian crude oil loaded directly from Iran. This shortage was caused by discharge delays in China during January, which reduced the number of tankers returning to Iran for new cargoes, reports Breakwave Advisors.
Logistic Disruptions
The Shandong Port Group’s ban on OFAC-sanctioned vessels has led to significant logistical disruptions:
- Sanctioned “dark fleet” vessels are idling offshore Asia, awaiting ship-to-ship (STS) transfers to “clean,” non-sanctioned vessels.
- As sanctions enforcement tightens, the pool of “clean” vessels for discharges into Chinese ports is shrinking. Only 69% of Iranian dark fleet VLCCs are currently active (loading via port call or STS within the last six months).
- Competition for dark fleet vessels to service Russia’s ESPO trade will further reduce availability for Iranian trade. This has already been observed with an Aframax leaving the Iran trade to load Russian Sokol crude after the January 10th OFAC sanctions.
- In the future, VLCC-sized dark fleet vessels may be used for STS operations in the Middle East for Russia Baltics-to-China shipments or offshore Yeosu to facilitate the Kozmino-to-China trade.
Intra Pacific Voyages
Intra-Pacific voyages have remained strong recently due to consistent demand for diesel and jet fuel, despite decreased naphtha exports from the Middle East Gulf. There’s been a slight increase in East-to-West middle distillate trade due to a briefly open arbitrage.
Looking forward, intra-Pacific LR voyage demand could be supported by lighter distillates. The Asian refinery turnaround season is expected to increase naphtha imports for petrochemical feedstock, compensating for lower domestic production. The upcoming gasoline blending season should also bolster naphtha demand as a key gasoline blending component.
LR vessel availability in the Middle East Gulf is increasing due to engagement in short-haul trades. This increased supply will likely limit potential freight rate increases from the Middle East.
Geopolitical Turbulence
Geopolitical events, including the Russia-Ukraine war, sanctions on Russia and Iran, and potential actions against Venezuela, have dominated headlines. Analyzing the impact of these events on crude tanker tonne-mile differentials (comparing pre- and during-war figures) reveals the following trends in early 2025:
- VLCC Benefit: VLCCs have seen increased demand as China and India purchased Atlantic Basin and Middle East Gulf (MEG) crude to replace Russian barrels following OFAC sanctions.
- Non-Mainstream Freight Stagnation: Demand for freight from Iran, Venezuela, and Russia has stagnated or slightly declined, indicating the effectiveness of vessel-specific sanctions and reduced demand from Shandong’s teapot refineries.
- Sanctions Impact: Further sanctions are making it more difficult to acquire discounted barrels.
- Continued Discounted Crude Demand: Despite challenges, China’s demand for discounted crude persists, and logistical obstacles are typically overcome.
- VLCC Boost: VLCCs are currently benefiting from these market dynamics. This positive trend could continue if the Russia-Ukraine war ends and Russian crude flows to the East decrease.
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Source: Breakwave Advisors
