Washington Considers Easing 'Shadow Fleet' Restrictions to Calm Freight Rates

A U.S. official is considering allowing the transport of legal oil on tankers that were part of the sanctioned "shadow fleet," according to Reuters. The official explained that the step would require the approval of the U.S. Department of the Treasury before implementation.

U.S. Energy Secretary Chris Wright proposed the idea during the World Petroleum Congress in Riyadh, according to the source. This comes at a time when tanker freight rates have surged to record levels due to disruptions in maritime lanes and attacks on ships.

In contrast, Energy Aspects believes this step will not significantly affect freight rates and will not add actual capacity to the fleet all at once. Analysts view that any expansion in tanker supply will take time before its impact appears in the markets.

This development affects global energy markets, as shipping costs form a portion of the price of crude oil reaching refineries, which reflects on fuel and commodity prices in the region.

What do these terms mean?

Shadow Fleet: Aging tankers that often operate outside the standard insurance and tracking systems to smuggle sanctioned oil, used to transport crude away from oversight.

Spot Freight Rates: The daily cost to charter a vessel for transporting a shipment on a specific voyage, rising when the number of available ships decreases or risks escalate.

U.S. Department of the Treasury: The authority managing the financial and economic sanctions of the United States, where any exemption from these sanctions requires its approval.