Crude oil prices retreated from yesterday’s highs earlier today, on the news that President Trump was considering lifting sanctions on tankers used to transport oil and fuels from Venezuela, Russia, and Iran in a bid to ease a deepening tanker crunch.
At the time of writing, Brent crude was trading at $104.39 per barrel, after earlier in the week it topped $106, while West Texas Intermediate was trading at $94.02 per barrel, after yesterday it climbed close to $96 per barrel.
The war in the Persian Gulf has tightened the availability of tankers because of the surge in ship-to-ship transfers off the coast of Oman, outside the Strait of Hormuz. As a result, tanker rates are running at record highs, also factoring in the risk of a drone or missile strike from Iran.
Amid these developments, Reuters earlier today cited an unnamed U.S. official as saying that the U.S. federal government was contemplating the easing of sanctions on some vessels from the so-called shadow fleet in order to bring those record tanker rates down. If any shippers want to use a sanctioned tanker, per the report, they would have to apply for that to the U.S. Treasury Department.
The record freight rates are problematic for the United States because they dampen demand for U.S. crude, according to Energy Aspects, as cited by Reuters. Also, Energy Aspects said the easing of sanctions on tankers used for transporting Russian or Venezuelan crude and fuels would not make much difference to tanker availability because “most tankers sanctioned over Russian or Venezuelan links have been actively trading over the past three months.”
The report comes on the heels of President Trump’s deal with Russia that should see the latter export up to 4.8 million tons of the fuel. The deal was criticized by U.S. legislators and European political leaders who claimed it would boost Russia’s money for war, even though the volume agreed under the deal was considered by most analysts rather insignificant and unlikely to change the supply status quo with diesel anywhere, including in the United States.
By Irina Slav for Oilprice.com
