US may relax shadow fleet curbs to tame soaring tanker rates

For oil traders, what matters more than the operational details is the policy signal: Washington is clearly putting cheaper fuel ahead of midterm politics and is prepared to adjust sanctions rules to achieve that. Any extra tanker supply in the Gulf would most directly help Middle Eastern crude reach Asian buyers, potentially reducing the premium those refiners pay for alternative supplies. Tanker stocks, which have gained from elevated rates, could be vulnerable to such headlines even if the actual capacity added turns out to be modest. Political fallout from the Russian diesel waiver suggests any formal measure will encounter pushback from Congress and European allies, meaning the policy could take time to materialise.

Earlier articles from InvestingLive covered Iran's IRGC evacuating military bases amid fears of a US strike and oil price gains after Houthis hit Aramco and Iran signalled new tactics against tankers.

Washington wants lower shipping costs before the midterms, but the older vessels under consideration may not do much to change freight rates.

Key points:

• The Trump administration is considering relaxing sanctions on shadow fleet tankers to reduce record freight costs, a US official told Reuters.
• The approach would allow non-sanctioned "legal oil" to be transported on vessels previously penalised, with firms needing Treasury approval, and is meant to boost oil flows from the Gulf.
• Energy Secretary Chris Wright mentioned the discussions in a video address to the World Petroleum Congress, per Energy Aspects.
• The move follows Trump's temporary removal of sanctions on Russian diesel through April 7, which drew rebukes from Ukraine, Europe and some Republican senators.
• Energy Aspects expects the effect on freight rates to be modest, although a few additional tankers could become available for Strait of Hormuz voyages.
• Industry sources noted that EU and UK rules governing ship insurers would constrain any widespread easing.

The Trump administration is weighing a relaxation of sanctions on what is known as the shadow fleet of tankers in order to lower record global freight charges, a US official told Reuters on Wednesday.

The shadow fleet consists of ships that have transported oil and fuel from sanctioned nations such as Russia, Iran and Venezuela, typically outside standard shipping and insurance frameworks. The conversations centre on permitting "legal oil" to be carried on ships that were previously subject to sanctions, the official said. That refers to crude or refined goods not covered by US sanctions, rather than Russian or Iranian petroleum, which remain restricted. The objective is to move more crude and refined products out of the Gulf, the official added, with companies required to seek approval from the US Treasury if they want to use those vessels.

US Energy Secretary Chris Wright told the World Petroleum Congress in Riyadh this week, via a video message, that the administration was discussing the initiative to address freight expenses that have dampened demand for US crude, according to Energy Aspects. Reuters reported it could not access the full video or a transcript. The Department of Energy said any relaxation would not aid Russia in moving oil or petroleum products, while the Treasury directed queries to the energy department. The White House did not immediately reply to a request for comment.

The talks come days after President Donald Trump temporarily lifted sanctions on Russian diesel until April 7. That step drew strong criticism from Ukrainian President Volodymyr Zelenskiy, European governments and some Republican senators, who argued it would provide Russia with additional revenue for its war in Ukraine. Reuters noted that Trump's drive to bring Russian diesel onto global markets swiftly could heighten pressure to permit shipments on those vessels.

Tanker rates have risen to records as conflicts involving Iran and Ukraine drive inflation and push US crude out of reach for Asian refiners, redirecting them towards Middle Eastern and Latin American supplies. Elevated fuel costs also pose a political risk for Trump ahead of the November 3 midterm elections.

Actual effects may be limited. Energy Aspects said easing the sanctions would have little impact on freight rates, since most of the older tankers involved have already been active in recent months, though it could free a few ships for shuttle runs through the Strait of Hormuz. Maritime industry sources told Reuters that ship insurers would remain constrained by EU and UK regulations, which would restrict any widespread easing in rates.