Oil Traders Want U.S. to Release Sanctioned Tankers as Freight Costs Soar

Major oil traders are asking Washington to let them buy or lease tankers currently under U.S. sanctions. The companies involved include Trafigura, Vitol, Mercuria and Abu Dhabi National Oil Co. The request matters because the tanker shortage has made moving crude unusually expensive.

The discussions cover approximately 50 blacklisted vessels. U.S. Treasury officials are considering licenses individually, but no approvals have been finalized. A license could allow a sanctioned tanker to return to commercial service for legitimate oil cargoes, depending on the vessel and its condition.

The potential relief is uncertain. Idled tankers would add real capacity, while legalizing vessels already moving sanctioned oil would do much less. Many ships also need repairs, inspections and insurance. U.S. approval would not automatically remove restrictions imposed by the European Union or Britain.

Being under U.S. sanctions means the tanker is subject to American legal restrictions because of its designation. In practical terms, transactions involving the vessel can be blocked or require government permission. The article refers to these ships as sanctioned or blacklisted vessels.

That status affects ownership, leasing, financing, insurance and commercial use. The proposed licenses would allow selected traders or investors to purchase, lease, acquire or refurbish some tankers for legitimate oil cargoes. The article does not identify the reasons behind each vessel’s designation, so those reasons cannot be assumed.

Sanctions relief would not instantly make every vessel usable. Many blacklisted tankers are old and need repairs, inspections and insurance before entering conventional service. Restrictions from the European Union or Britain could also remain, even if the United States authorizes a transaction.

The scale of the sanctions list is large. As of November 4, U.S. sanctions covered 1,568 ships, according to Treasury data compiled by Bloomberg. That figure includes vessels of different types, not only oil carriers.

Crude tankers made up 462 of the sanctioned ships. This is the most relevant category for the current shipping squeeze because crude tankers carry unrefined oil between producers and distant buyers. The article’s proposed arrangement concerns approximately 50 vessels within the wider sanctioned fleet.

The headline total does not equal immediately usable shipping capacity. Many sanctioned tankers are aging and may need repairs, inspections and insurance. Also, U.S. authorization would not automatically remove restrictions imposed by the European Union or Britain. The practical effect therefore depends on which vessels receive approval and can actually re-enter service.

War-related disruption has reduced the efficiency of the tanker fleet. The article says the Iran war forced vessels onto longer routes, increased insurance costs and caused inefficient transfers around the Strait of Hormuz. Each problem makes a tanker less available for its next cargo.

A longer route keeps a ship occupied for more time. Higher insurance raises the expense of each voyage. Transfers around the strait can also delay cargoes and tie up vessels without moving crude efficiently. Together, these pressures create a shortage even when the number of physical tankers has not suddenly vanished.

The market impact has been dramatic. Chartering a supertanker from the U.S. Gulf Coast to China reached nearly $80 million in October, about ten times the average before the conflict. The disruption also helped push the cost of shipping U.S. crude to Asia to $30–$35 per barrel.

The cost of shipping U.S. crude to Asia rose dramatically. Valero estimated it had reached $30 to $35 per barrel, compared with approximately $5 a year earlier. That increase can make distant U.S. supplies much less attractive to Asian buyers.

The article gives an even larger route-specific figure. Chartering a supertanker from the U.S. Gulf Coast to China reached nearly $80 million in October, roughly ten times the average rate before the conflict. These costs reflect scarce vessels, longer routes, higher insurance and inefficient transfers around Hormuz.

Asian buyers responded by cutting orders. Orders for U.S. crude scheduled for November delivery fell approximately 50% in October. Shipments could therefore reach their lowest level in seven years. Releasing suitable sanctioned tankers might reduce the pressure, but only if those vessels add usable capacity rather than merely carry sanctioned oil legally.

Sanctions relief would add new shipping capacity only when it brings previously unavailable tankers back into useful service. That could increase the number of vessels available for ordinary oil cargoes and ease pressure on charter rates. It would not necessarily help if the ships are already operating.

The article draws a clear distinction. Restoring previously idled tankers would add actual capacity. Simply legalizing vessels already transporting sanctioned oil would do considerably less because those ships would not be newly available. Their legal status would change, but the physical fleet would barely expand.

Even approved vessels may not return quickly. Many blacklisted tankers are aging and require repairs, inspections and insurance. They could also face European Union or British restrictions. The proposal’s effect therefore depends on vessel condition, regulatory approval and whether the ships genuinely re-enter conventional commercial service.

The global tanker market connects oil producers with buyers far away. Producers arrange crude cargoes, tankers carry them across sea routes, and receiving ports deliver the oil into regional supply systems. Traders often organize these movements and pay charter rates for the vessels. This seaborne network lets distant buyers purchase crude from overseas producers.

A vessel shortage disrupts that chain. Each tanker can carry only one cargo at a time, so longer journeys keep ships unavailable for longer. Delays, rerouting and transfers reduce effective capacity further. Charterers then compete for fewer available ships, pushing freight prices higher. Insurance and other voyage costs can rise at the same time.

The article shows the consequence. Shipping U.S. crude to Asia reached $30–$35 per barrel, versus about $5 a year earlier. Asian orders for November delivery fell roughly 50%. The article links this pressure to war-related disruption and a shortage of usable tankers.