With Greece, the biggest single owner of tankers and Hormuz, one of the most important trade lanes for seaborne crude transportation, it’s easy to see why the recent seizure of two Greek-owned VLCCs, by the Iranian Revolutionary Guard, can start to have a ripple effect in tanker trade, until the matter is resolved.

In its latest weekly report, shipbroker Allied said that “crude oil prices breached the US$ 120 a barrel once again, after close to a 3-month break, as global markets continue to feel the pressure mounting from the ongoing tightness in supplies as well as the further boost in post-Covid demand levels. With a fair share of the world cutting back from Russian exports and with OPEC still shying away from any decision to accelerate oil production increases to rein back these price hikes, the overall trend noted in crude oil prices continues to firmly point in an upward direction”.

According to Allied’s Head of Research & Valuations, Mr. George Lazaridis, “things seem to have taken an even more disruptive turn this past weekend as Iran seized two Greek oil tankers in the Middle East Gulf, a decision seemingly linked to last month’s seizure in Greece of a Russian-flagged oil tanker carrying Iranian crude. Despite all this sounding similar to 2019, when Iran had seized a British-flagged tanker shortly after the UK had detained an Iranian vessel in Gibraltar, there is a hint that things are a bit different this time around. For one, crude oil markets have already been under considerable pressure as is and any further disruptions could well keep energy markets on their toes for much longer”.

Lazaridis added that “given that talks between Western powers and Iran over reviving the 2015 nuclear pact seemed to have once again hit a roadblock, it seems that markets are open for similar situations developing down the line. Adding to this is the fact that the Strait of Hormuz is one of the busiest oil tanker lanes, while at the same time Greece holds the lion’s share in crude oil tanker ownership and you start to see how this could adversly affect crude oil trade. For the moment, most of these market shocks seem to be feeding a further market boost in the freight market right now.

After having faced almost 2 years of difficult market conditions, tankers have started to see some positive trends in the making since Russia’s invasion of Ukraine. The rapid re-shifting of trade patterns, along with uncertainties over possible sanctions, have caused traders to shift their focus away from Russian supplies and onto more distant alternatives. With Covid restrictions having been lifted across most of the West, placing travel and general mobility back on the menu for most consumers, demand has seen a re-birth in recent months”.

“At the same time, this demand has for the time being avoided being hampered by the recent spike in prices, thanks primarily to the splurge in government subsidies that have been given out to support local economies and consumers. This escalation in demand is only looking to intensify during the summer months, with Europeans and Americans looking to make up for all their lost vacation travels these past 2 years.

Source: Allied Shipbroking

For now, it looks as though the improved freight market conditions noted in the tanker markets looks to still have plenty more momentum at hand. Given the shakeup, there may well be a surge in longer haul shipments in the near term. At the same time, the recent increased tensions with Iran may well be what is needed to push OPEC into further action to turn on the taps. If they were to finally decide to turn on the taps and increase their oil production at an ever-faster pace, it would surely boost things further, rejuvenating demand levels and even pushing for an increase of strategic stockpiling by most major economies. As positive as all this sounds for the near term, things are likely to settle back down in the longer term, while given the stronger push noted for upkeeping emission targets consistent with the Paris climate agreement and an even bigger push for energy sovereignty by nations, crude oil markets still have very difficult hurdles to overcome moving forward”, Allied’s analyst concluded.

Marex Media