Recent developments have garnered renewed attention. This week, the UK imposed sanctions on 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 phantom ship heading to Russia.
With the tightening of enforcement measures and shifting political dynamics, the future of the phantom fleet is a critical factor for market fundamentals.
What future developments are possible?
Various scenarios could reshape the role of the phantom fleet:
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U.S.-Iran Agreement: A nuclear deal could bring Iranian oil back into legitimate trade, thereby reducing the demand for the phantom fleet and subsequently increasing the demand for compliant tankers to take over this trade.
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End of the Russia/Ukraine war: Although unlikely in the short term, a relaxation of sanctions would lead to a shift in volumes towards the compliant fleet, as Russian crude and product exports would be replaced by compliant tonnage.
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No significant change: The activity of the phantom fleet would continue, but it would face increasing regulatory pressure and heightened operational risk.
What would be the consequences of lifting the sanctions?
A peace agreement between Russia and Ukraine and/or a de-escalation between the United States and Iran would lead to several repercussions. These developments are crucial:
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A significant portion of the phantom fleet—especially the older vessels—would likely exit the market.
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This would tighten the supply of the compliant fleet and could potentially drive up freight rates.
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Depending on where Iranian oil exports are directed, demand could increase by 40 to 100 Suezmax equivalents, particularly if trade shifts towards Asia and Europe.
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The demand for new builds could rise, particularly in the crude segments.
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Some newer phantom ships might re-enter traditional trade.
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The transition could lead to a more robust pricing environment and more stable and transparent market conditions.
In conclusion: The compliant fleet is poised to reap the benefits
The phantom fleet has become a pivotal component of global oil transportation, yet its future is closely tied to international political dynamics. Whether through the lifting of sanctions or the strengthening of enforcement measures, its role is likely to undergo significant changes. This primarily results in increased risk for the compliant market, a tighter supply, and higher freight rates.
Sources: Clarksons, Tradewinds, Splash24/7