Shadow fleet tankers face steep hurdles before they can ease tanker rates, from an average vessel age above 20 years to the sanctions and compliance checks that keep many of them out of mainstream trade. That matters because very large crude carrier (VLCC) rates sit at what appear to be all-time highs, high enough that oil producers in the Persian Gulf have found it cheaper to buy ships than to charter them. With the U.S. administration discussing letting the sanctioned shadow fleet back into the market, the question for charterers and refiners is a simple one. Can a fleet of aging, sanctioned tankers really loosen a market this tight?
Tom Beney, StoneX SVP of Ocean Freight, oversees the firm's global freight strategy across tanker, dry bulk and container markets and works directly with shipowners, charterers and bunker suppliers. He follows ocean freight rates and supply chain risk across global commodity trade flows, the same tanker capacity, sanctions and rerouting pressures that govern any return of the shadow fleet to mainstream trade.
Key Themes from the Discussion
The shadow fleet's average vessel age of 22 to 23 years limits how many voyages those tankers can add.
Ownership, sanctions and OFAC compliance checks make it difficult for shadow fleet tankers to join mainstream trade.
Oil inventories drawn down for at least six months leave a supply pipeline that still needs refilling.
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Shadow Fleet Age Caps the Relief for Record Tanker Rates
"The average age of that shadow fleet is 22, 23 years old. We might be able to alleviate one or two voyages of those ships. But it's peanuts compared to the whole thing," Beney says of the sanctioned tankers the U.S. administration has discussed allowing back into the market. Shadow fleet tankers are being weighed as a way to reduce freight rates overall, yet the vessels involved are already close to the end of their working lives. As a result, any capacity the shadow fleet adds is likely to arrive in small, short-lived increments rather than as a lasting expansion of the tanker fleet. Notably, the squeeze is far larger in scale, with producers buying older VLCCs outright because chartering has become the more expensive option. For charterers hoping the shadow fleet will quickly bring tanker rates back to earth, vessel age alone narrows the window.
Sanctions Compliance Keeps Shadow Fleet Tankers Out of Mainstream Trade
Sanctions and Office of Foreign Assets Control (OFAC) compliance checks stand between shadow fleet tankers and mainstream oil trade, regardless of how high freight rates climb. A vessel that has operated outside the sanctions framework cannot simply switch into mainstream charters once the policy door opens. The obstacle, Beney explains, is that "it depends on the ownership, who owns the ship and whether they would pass sanctions or OFAC compliance", a test applied ship by ship rather than fleet-wide. Consequently, the number of shadow fleet tankers that actually reach mainstream trade flows could be far smaller than the size of the shadow fleet suggests. For refiners and commodity shippers, that means a policy change on paper does not translate directly into more ships available to charter.
Oil Inventory Rebuild Sustains Demand for Every Available Tanker
Oil inventories have been drawn down for at least six months, leaving a supply pipeline to refill that sustains demand for tanker capacity well beyond any shadow fleet release. The oil market is running a deficit, and rebuilding lost stocks requires crude to keep moving from producing regions to consumers. Unlike a market with spare ships chasing cargoes, the tanker market is short of vessels just as the refill begins. Any shadow fleet tankers that do clear compliance are therefore stepping into steady demand rather than an oversupplied market. According to Beney, "whatever ship comes into the market and is able to trade will get business".
--- Written by Gus Farrow, Senior Manager, StoneX Media
--- Expert: Tom Beney, StoneX SVP of Ocean Freight
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