Why it matters, and what follows
The ghost fleet—tankers carrying oil from sanctioned nations such as Russia, Iran, and Venezuela—has become a pivotal component of the tanker market. These vessels, frequently operated with minimal oversight and lacking standard controls, now account for approximately 23% of the global fleet.
Most of these are older vessels, averaging 23 years in age, with over half being more than 20 years old, making them significantly less efficient than compliant tonnage.
Recent events have garnered renewed attention. This week, the UK sanctioned 100 ships, followed by the EU with an additional 189, now targeting over 340 vessels involved in the grey trade. Meanwhile, geopolitical tensions have escalated in the Baltic, where Estonia attempted to block a ghost ship heading to Russia.
As enforcement measures tighten and political dynamics evolve, the future of the ghost fleet becomes a critical factor for market fundamentals.
What potential developments lie ahead?
Various scenarios could reshape the role of the ghost fleet:
U.S.-Iran Agreement: A nuclear deal could reintegrate Iranian oil into compliant trade, thereby reducing the demand for the ghost fleet and subsequently increasing the demand for compliant tankers to replace this trade.
Peace between Russia and Ukraine: Unlikely in the short term, but it would lead to a shift in volumes towards the compliant fleet if sanctions are eased, as Russian crude and product exports would be replaced by compliant tonnage.
No major changes: The ghost fleet's activities would continue, but it would encounter increasing regulatory pressure and heightened operational risk.
Market Outlook: What happens if sanctions are lifted due to peace between Russia and Ukraine and a de-escalation between the United States and Iran?
A significant portion of the ghost fleet would become redundant, particularly the older vessels that likely do not meet compliance standards.
This could lead to a significant reduction in the fleet's effective capacity, causing a short-term tightening in the compliant tanker market.
Many vessels in the ghost fleet are too old (average age: 23 years) to be reintegrated into the mainstream. These ships would likely be dismantled or gradually phased out (around 50% of the ghost fleet).
Fleet growth could turn negative in the short term due to the withdrawal of older tonnage without immediate replacement.
The demand for tankers to transport crude oil could rise by 40 to 100 Suezmax equivalents (20 to 50 VLCCs), depending on the destination of Iranian oil exports, particularly if trade shifts towards Asia and Europe.
The shipping distances for Russian crude and product trade will decrease, offset by the anticipated dismantling of older sanctioned tonnage (refer to the Clarksons figure below).
Although some major oil companies have publicly stated they will not charter ships from the former ghost fleet, the newer and better-maintained tankers in this segment could realistically be reintegrated into the compliant fleet.
The demand for new constructions could rise to offset the lost capacity, particularly in the crude segments.
Over time, a more stable and transparent tanker market would emerge, featuring reduced operational and regulatory risks. However, before this occurs, a period of high rates for compliant tankers is anticipated if the majority of the ghost market vanishes!
Conclusion: Predominantly Benefits for the Compliant Market
The ghost fleet has become a central component of global oil transportation, yet its future is closely tied to global politics. Whether through the lifting of sanctions or the continuation of restrictive measures, its role is likely to change significantly. For the compliant market, this primarily results in an upside risk—a tighter supply and higher freight rates.
Source: BRS, Clarksons, OFAC and Tradewinds