- OFAC sanctions four VLCCs and two Aframaxes for transporting Iranian crude.
- Houthis resume attacks after U.S. airstrikes, targeting American warships.
- Suezmax earnings reach $63,000 per day, the highest level in a year.
The U.S. Office of Foreign Assets Control (OFAC) has targeted further ships involved in carrying Iranian crude: Four VLCCs (19-25 years old) and two Aframaxes (16 and 22 years old). This follows Thursday’s sanctioning of a further 10 tankers, six VLCCs, two Aframaxes, one MR, and one Panamax, plus three Indonesia-flagged tugs. The majority of the sanctioned ships were present in East Asia, with most having obsolete AIS signals. There was a VLCC that was last recorded sailing Venezuelan crude in the Atlantic, and Aframax recently delivered Russian Sokol crude into China, reports Break Wave Advisors.
China’s Teapot Refinery Under Sanctions
OFAC also sanctioned Shandong Shouguang Luqing Petrochemical, a teapot refinery in Shandong Province, for buying millions of barrels of Iranian oil valued at about $500 million. The crude was shipped on shadow fleet tankers, some of which were already sanctioned.
Effect on Iran’s Oil Exports
With these additional steps, 65% of the tankers shipping Iranian crude in 2024 are sanctioned, with only 35% left unsanctioned. Though Iran is likely to keep selling oil, Chinese customers are becoming increasingly risk-averse. Teapot refineries, which operate on knife-thin margins, might still purchase Iranian crude at deep discounts, but Beijing won’t step in. State-owned companies, which shun Iranian oil, still dominate the market.
Houthis Resume Attacks After U.S. Strikes
The collapse of the Israel-Gaza ceasefire and U.S. strikes against Houthi targets in Yemen have increased threat levels in the Red Sea and Bab el-Mandeb Strait.
- The U.S. attacked Houthi positions on Saturday following a pledge by the group to renew attacks against Israeli ships on March 12.
- The Houthis have attacked U.S. warships in the Red Sea three times since then.
Risk of Retaliation Against Shipping
Rising tensions have raised the threat of retaliatory attacks by Houthis and Iran, targeting commercial ships in the area. A further deterioration can result in Iranian tanker seizures in the Strait of Hormuz.
Trans-Niger Pipeline (TNP) Shutdown
An alleged attack on the 180,000 b/d Trans-Niger Pipeline (TNP) has suspended crude shipments to Nigeria’s Bonny Light export terminal.
A fire broke out near Kpor and Bodo, leading pipeline operators to shut in the affected part. TNP, formerly managed by Shell, had earlier suffered prolonged shutdowns over oil theft and vandalism, including a complete shutdown between April and October 2022.
Effect on Bonny Light Exports
Bonny terminal loadings were delayed by as much as two weeks already before the attack. The terminal exports an average of 160,000 b/d of Bonny Light crude, so a long shutdown could reduce exports by five fewer Suezmax loadings a month. The Almi Voyager was the final tanker loaded with crude there on March 14, shipping 800,000 barrels.
Freight Rates Surge
Suezmax rates in the Mediterranean have risen to a year high of $63,000/day, from only $18,000/day at the beginning of 2024.
Boost in Kazakh Oil Production Fuels Demand
Kazakhstan’s Tengiz oil field has boosted capacity, increasing 260,000 b/d on the CPC pipeline system through Q2, taking overall CPC production to near 960,000 b/d.
- The April CPC program consists of 38 Suezmax cargoes, down slightly from March’s 41 but significantly higher than in the past.
- Aframax loadings declined from 33 in January to 25 in February, with March following the trend towards Suezmax dominance.
Limited Impact from Ukrainian Drone Strikes
Recent Ukrainian drone attacks on Russia’s Kropotkin pumping station (CPC pipeline) have not had a major impact on tanker loadings.
Potential Risks to Future Output
Kazakhstan is being squeezed to bring its production in line with OPEC+ quotas, but there is little sign of cuts yet. The dismissal of Kazakhstan’s oil minister on Tuesday indicates internal battles over production targets.
Tightening Tonnage Supports Rates
An increasing percentage of CPC Blend crude is flowing to Asia—9 million in March and 3 million now reserved for April—which boosts ton-mile demand and constrains supply in the Black Sea and Mediterranean markets. Notwithstanding robust demand in the Black Sea, it has had a modest impact on the West Africa-to-UKC and U.S. Gulf-to-UKC routes.
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Source: Break Wave Advisors
