Oil prices shrug off US-Iran’s cat-and-mouse game over sanctions

While the Trump administration imposes more sanctions on Iranian oil transport, Tehran continues to attract more vessels to join the high-risk but lucrative trade. Therefore, we don’t expect any significant decline in Iran’s crude exports in the near term.

The US Treasury Department imposed sanctions on 13 oil tankers and 17 trading firms for allegedly transporting Iranian oil, its third round of such measures since Trump took office in January as part of the ongoing maximum pressure campaign against Tehran. The new sanctions were introduced just a day after Iran’s Supreme Leader, Ayatollah Ali Khamenei, flatly rejected talks with the U.S. over a nuclear deal.

The fresh sanctions will undoubtedly further disrupt Iran’s oil exports, as the country has been grappling with insufficient shipping capacity after the U.S. blacklisted over 100 tankers since Q4 2024. However, the reaction in oil prices remains largely muted, suggesting that the market is sceptical about whether this same old tactic of targeting tankers can meaningfully curb Iranian exports.

Despite tougher U.S. sanctions, Iran’s crude oil exports surged to a whopping 1.82 mbd in February, the highest level since October 2018. In the meantime, China’s imports of Iranian crude reached at least 1.43 mbd, a level last seen in October 2024. Notably, among the February arrivals, two vessels—Hornet and Aventus I were on the OFAC list at the time they discharged cargoes at Huizhou and Huangze, signalling that the ports were willing to receive sanctioned vessels. Market insiders told Kpler that China’s General Administration of Customs has issued no directive on clearing cargoes from OFAC-listed tankers. Therefore, the decision to take the risk ultimately rests with local authorities.

That said, as previous reports illustrate, the extent of Iran’s oil export reductions in response to Washington’s stricter sanctions on vessels will largely depend on Beijing’s cooperation. The U.S. recently imposed sanctions on several oil tankers, including Peace Hill, Star Forest and CH Billion, for allegedly facilitating the movement of stranded Iranian oil from storage in Dalian. However, according to a market insider, the sanctions came only after Iran had already successfully shipped out its entire stock from Dalian.

Meanwhile, we have observed at least nine vessels that were previously not involved in Iranian crude oil shipments entering the trade. These include Sun I, Kapok, Eternal Peace, Agni, Blue Gulf, and T Cereal, which were primarily engaged in transporting Russian crude oil and fuel oil in 2024, as well as Reneez, Divit and Ying Ge, which were dedicated to shipping Iranian fuel oil. While tougher U.S. sanctions are expected to make it more difficult to attract new tankers to Iran’s oil fleet, the potential removal of U.S. sanctions on Russian tankers after the Ukraine war ends could prompt some dark fleet vessels to shift routes.

Until then, Iran will continue to struggle with shipping capacity constraints. Kpler data shows that Iranian crude oil floating storage increased for the third consecutive week last week, reaching 22.7 mb—the highest level in over a year. From a buyer’s perspective, demand for Iranian crude is expected to strengthen as Chinese teapots seek to ramp up production while state-owned refiners undergo maintenance during the March-May period. Iranian Light crude is reportedly trading at a $1/bbl discount to ICE Brent on a delivery basis in Shandong, the highest level since June 2022.

Iranian crude oil floating storage by current sea, mb

Source: Kpler

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