The transportation of Iranian oil to China is increasingly relying on smaller, more agile tankers, as US sanctions continue to put pressure on the illicit trade, Bloomberg News reported on Tuesday.
Ship-tracking data reveals that Aframax and Suezmax vessels have seen increased activity on the sensitive route.
Kpler data showed that eight tankers received Iranian crude from supertankers via ship-to-ship transfers in February, with most of them heading to China.
Shifting ship sizes
This is an increase from two tankers in each of the previous two months, December and January.
The shift towards utilising smaller vessels for transporting crude oil between Iran and China has captured the attention of shipping companies.
This change is notable, as this particular trade route has traditionally been dominated by very-large crude carriers (VLCCs), which are also referred to as supertankers due to their immense size and capacity.
The reasons behind this shift could be multifaceted, potentially including factors such as sanctions, port restrictions, or changes in oil production and demand.
Shipbrokers and analysts suggest that the shift towards smaller tankers for transporting crude oil is primarily driven by the need to access shallower Chinese ports.
These ports, such as Dongying, are increasingly used to receive oil shipments from Iran and Russia.
The larger tankers traditionally used for these shipments are unable to navigate the shallow waters of these ports, necessitating the use of smaller vessels with shallower drafts.
This adaptation allows for continued trade and efficient discharge of oil at these key Chinese terminals, ensuring the steady flow of crude oil imports despite the infrastructural limitations of certain ports.
Larger terminals that manage containers and bulk cargoes along with other goods have become cautious of secondary sanctions.
US sanctions impact
The US has significantly increased sanctions against Iran under both the Biden administration and the Trump administration.
President Trump’s policy of “maximum pressure” against Tehran has led to the blacklisting of numerous ships in recent months.
This intensified sanctioning has particularly impacted VLCCs, which are more commonly used in the oil trade, than other types of vessels.
Due to stricter regulations surrounding the utilisation of supertankers and a growing reluctance from certain Chinese ports to handle Iranian oil, there has been a marked increase in ship-to-ship transfers of oil at sea.
This shift has also necessitated a greater reliance on Aframax and Suezmax tankers, which are smaller than supertankers and can more easily navigate certain ports and waterways.
These changes in the logistical handling of Iranian oil highlight the ongoing challenges and complexities of the global oil trade, particularly in regions with geopolitical tensions.
The use of ship-to-ship transfers and smaller tankers can increase the cost and risk of transporting oil, but it also allows oil to continue flowing despite restrictions and sanctions.
New strategies emerge
The US sanctions on Tehran have resulted in the development of new strategies to restructure supply chains, ensuring the continued flow of Iranian oil into China.
Exports from ports like Kharg Island used to rely on Iranian-owned VLCCs that sailed directly from the Persian Gulf to China.
Due to increased scrutiny and clampdowns, ship-to-ship transfers at locations off Malaysia and Fujairah are now more common, masking the cargoes’ origins.
Further, Kpler data showed that before February, ship-to-ship operations off Malaysia almost exclusively involved supertankers, which can carry about 2 million barrels of oil.
Using multiple transfers and smaller tankers, such as Suezmax vessels (1 million barrel capacity) and Aframax ships (700,000 barrel capacity), can increase overall transportation costs.
The Aframaxes Reston, Brava Lake and Shun Tai received Iranian crude from the sanctioned supertanker Lan Jing (formerly Wen Yao) in three separate ship-to-ship transfers off Malaysia in February, according to Kpler.
Iranian VLCC Derya transferred its cargo to Suezmax Aventus I and Aframax Viola in the same month that three vessels were headed to the ports of Huangdao, Dongying, and Zhoushan, respectively.
The shipments were destined for Dongjiakou and Dongying, according to the report.
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