E.A. Gibson Shipbrokers Ltd. comments today in an e-mailed report on how the market for very large crude carriers hauling 2 million-barrel cargoes of oil will react to sanctions against Iran.
A European Union embargo on buying, financing, transporting and insuring Iranian oil aimed at pressuring the country over its nuclear ambitions takes effect July 1. The International Atomic Energy Agency will meet May 21 with Iran to discuss the program.
“If the meeting next week brings some more positive news, it appears to be in everyone’s economic interests to delay the sanctions. However, it will have a major negative impact on the crude tanker markets, primarily VLCCs.
“Firstly, it will open the door for a greater utilization of the Iranian tanker fleet in the international trade, adding more fresh supply to an already overtonnaged market. At the same time, it is likely to push oil prices to lower levels.
“Although initially shipowners will benefit from lower bunker prices, in the longer run it will result in a reduction in crude output by Middle East OPEC producers (excluding Iran).
“However, if there is no agreement and further sanctions are implemented from July 1, VLCC rates are likely to increase significantly, with uncertainty surrounding tankers that load at Iranian terminals and the inability of Iranian tonnage to trade internationally. Also, more OPEC crude will be needed to ease the upward pressure in oil prices.”
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