Jefferies Shares Its Insights on Tanker Stocks Following U.S. Sanctions on Iranian Oil Exports
Investing.com -- Tanker stocks sharply increased on Tuesday following the U.S. Treasury's imposition of sanctions on 21 additional vessels carrying Iranian crude oil, including 10 very large crude carriers (VLCCs). According to a note from Jefferies, this move signals a renewed effort to enforce sanctions against Iran, which could significantly tighten global VLCC supply and bolster the tanker market.
Jefferies maintains its positive outlook on tanker stocks, citing attractive valuations, improving sentiment, and a stronger winter demand season. The firm highlights DHT Holdings (NYSE:DHT), Frontline (NYSE:FRO), and International Seaways (NYSE:INSW) as the best investments that could benefit from potential positive winds in the VLCC market.
With the latest sanctions, the total number of VLCCs under restriction has risen to 35, and an additional 85 vessels potentially carrying Iranian oil are on the "watch list." These 120 vessels represent approximately 14% of the global fleet of 850 commercial VLCCs and pose a significant capacity risk should sanctions further intensify.
Iran's crude oil exports rose from 0.3 million barrels per day (mb/d) during 2019-2022 to 1.7 mb/d in 2024, largely due to weak enforcement of sanctions and reliance on shadow fleets. Most of this export goes to China, exerting pressure on other producers such as Saudi Arabia, whose exports decreased from 6.5 mb/d in 2023 to 6.0 mb/d in 2024.
Jefferies views the sanctions as a potential catalyst for the tanker market. Restricting Iran's shadow fleet could reduce VLCC availability and increase demand for non-sanctioned vessels to meet global crude oil transportation needs. A repeat of 2019's market dynamics, when 50 VLCCs were taken off the market due to U.S. sanctions against Chinese firm COSCO, resulting in rates exceeding $200,000 per day, could be on the horizon.
Should sanctions further restrict Iran's crude oil exports to levels seen during 2019-2022, global tanker utilization could rise from 85% to 95%, significantly tightening market conditions. According to Jefferies, the combination of tighter sanctions, declining VLCC supply, and increasing demand for non-sanctioned crude oil transportation creates a favorable risk-return dynamic for tanker stocks.