What's Driving the Crude Tanker Industry in 2016?
Iran and crude oil
Iran has the fourth largest crude oil reserves in the world. The country had been banned from exporting oil, but in January 2016, the ban was lifted. Iran now exports more than two million bpd (barrels per day). Iran has doubled its crude oil (USO) exports since January despite initially facing insurance, financing, and legal difficulties.
Iran has resumed exporting oil to Europe. However, its main customers are Asian countries like China, India, Japan, and South Korea. The majority of these trades take place via sea routes. Thus, investors should watch Iran’s exports when analyzing companies such as Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).
Saudi Arabia’s efforts to slow Iran’s exports
While Iran is fighting the odds to export its oil, Saudi Arabia is taking steps to reduce Iran’s exports. For example, Saudi Arabia has banned tankers transporting Iranian crude oil from entering its waters, according to traders and shipbrokers.
Iran and Europe
Before sanctions were imposed in 2012, one-third of Iran’s exports went to Europe. After the sanctions were lifted in January, Iranian exports to Europe slowly started picking up. Iran is facing some difficulties exporting oil to Europe. According to reports, there is no dollar clearing or established mechanism for non-dollar sales, and banks are reluctant to provide letters of credit to facilitate trade. Also, Iran is not able to get access to storage tanks in Egypt’s port of Sidi Kerir. This was Iran’s main terminal for oil supplied to Western countries before the sanctions.
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