EU Ban on Syrian Oil May Boost Tanker Demand, Goldman Says

A possible European Union ban on Syrian oil exports may boost demand for supertankers and have a “significant” impact on depressed hire rates, Goldman Sachs Group Inc. (GS) said.

Imposition of an embargo would require the EU to seek crude oil from more distant suppliers, such as those in the Persian Gulf, lenghtening journeys, Goldman said today in an e-mailed report. Aframax vessels typically used to transport oil in the Mediterranean Sea would be replaced with larger ships, potentially increasing demand for supertankers by 2.5 percent, according to the report.

Diplomats from the 27-nation EU approved the oil embargo at a meeting in Brussels on Aug. 29, expanding sanctions against President Bashar al-Assad’s government for its deadly crackdown on protesters, according to a person familiar with the matter. EU foreign policy chief Catherine Ashton announced the planned embargo earlier this month, citing “intensifying large-scale use of indiscriminate military force.”

“If implemented, this ban is likely to have a significant impact on currently depressed VLCC rates,” Goldman analyst Edouard Baldini wrote in the report, referring to supertankers, which are also known as very large crude carriers.

Syria exports 162,000 barrels of light crude a day, with 88 percent heading for Europe, according to the report, citing data from Lloyd’s List Intelligence.

The EU is widening sanctions against Syria that include an asset freeze and a travel ban on 50 people and nine entities deemed “responsible for the violent repression against the civilian population.” The United Nations puts the death toll at more than 2,200.

Tanks, Helicopters

Faced with the most serious threat to his family’s 40-year rule, Assad has deployed tanks, armored vehicles, artillery and helicopters to crush the uprising that began in mid-March after revolts ousted the leaders of Tunisia and Egypt and sparked a conflict in Libya.

EU imports of crude oil from Syria in 2010 totaled 3.16 billion euros ($4.55 billion), according to the European Commission, the bloc’s executive arm. The import ban will go into effect after EU governments take a final decision on the matter and it is published in the bloc’s Official Journal in the coming days.

Minus Rates

Daily rental income for supertankers on the benchmark Saudi Arabia-to-Japan voyage plunged to minus $207 yesterday, according to the Baltic Exchange in London. Earnings first turned negative on Aug. 1, according to the exchange, and have only been positive for seven days this month as a surplus of the vessels persists.

Owners are contending with a supertanker fleet that’s the largest in 29 years and growing at the fastest pace in more than three decades, forcing freight rates to a 14-year low.

Supertankers carry about 2 million barrels of oil, suezmaxes about half of that and aframaxes about 690,000 barrels.

To contact the reporter on this story: Robert Sheridan in London at rsheridan6@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.