Traders seek U.S. licenses to use sanctioned tankers as ship shortage bites

What traders want and why

A quartet of major oil players is asking Washington for permission to acquire or charter some tankers that are on the U.S. sanctions list for moving illicit crude. People familiar say Trafigura, Vitol, Mercuria and ADNOC are seeking licenses to put a slice of the blacklisted fleet back to work to ease a vessel squeeze and take pressure off prices.

The appeal lands as the administration tries to tamp down costs that jumped after the U.S. and Israel began their war on Iran, setting off the largest supply interruption on record. With fewer safe ships and higher risks through the Strait of Hormuz, freight bills have surged and become a bigger share of the delivered oil price.

How the shipping crunch raised costs

Moving costs feed straight into crude prices. In early October, the price to ship American crude to Asia aboard a supertanker nearly hit 40 dollars a barrel, up from about 5 dollars a year earlier. Rates have cooled since but are still close to historic peaks, helping keep benchmarks around 100 dollars.

Safety concerns have forced some cargoes onto longer routes and pushed charterers to pay up for insurance. The result is longer voyages, tighter availability, and higher delivered prices.

The review, the limits, and who is silent

Energy Secretary Chris Wright said last month that the administration has been partnering with investors to buy idle sanctioned tankers, refurbish them, and deploy those ships to move non-sanctioned oil. The aim, he said, is to turn "dark tankers to legitimate tankers."

According to people with knowledge, Treasury officials are evaluating applications and could grant licenses individually instead of issuing a broad waiver. Discussions cover roughly 50 ships out of about 1,600 currently under U.S. sanctions. No final calls have been made and timing remains uncertain.

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If approved by Treasury or the Office of Foreign Assets Control, the authorization would apply solely to vessels sanctioned by the U.S. The European Union and the U.K. maintain sweeping curbs on Russian and Iranian flows and have targeted the "shadow fleet" used to dodge Russian export restrictions. ADNOC and Vitol, along with Trafigura and Mercuria, declined to comment.

As of November 4, U.S. sanctions applied to 1,568 ships, including 462 crude carriers, based on Treasury figures compiled by Bloomberg. Many manage to avoid active enforcement, often by turning off their satellite tracking.

What it could mean for prices and your portfolio

The applications include supertankers, the industry's largest ships, each able to carry around 2 million barrels. How much this would trim prices depends on which vessels get cleared. Rehabilitating ships that are actually idle - such as the Skipper, which has remained near the Texas coast since December - would add more capacity than simply reclassifying tankers already operating in the so-called dark fleet, one person said.

Most sanctioned vessels are older than mainstream tonnage, raising upkeep and safety questions. Even so, they could handle short hops, like runs between the U.S. and the Caribbean or Latin America, which would free newer tankers for long distances.

The administration has also tapped emergency reserves and relaxed some fuel rules to fight costs. Yet pump prices remain elevated and were a major contributor to the Republican Party's staggering midterm losses this week. For investors, the bottom line is straightforward: freight remains a swing factor for crude, Washington is considering targeted approvals for about 50 ships, and any relief hinges on how quickly truly idle capacity returns to sea.

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