Oil tanker CEO sees Hormuz traffic quickly increasing on U.S.-Iran deal

Commercial ship traffic through the Strait of Hormuz should quickly increase if the U.S. and Iran reach a stable agreement that improves security in the strategic sea lane, the CEO of a leading oil tanker company told CNBC.

“I’m actually very optimistic the minute the tide turns and the U.S. and Iran have found some sort of agreement, at least not to attack shipping, that those transits are going to resume pretty quickly,” said Lars Barstad, CEO of the publicly traded tanker company Frontline, in an interview this week.

Headquartered in Cyprus, Frontline has a fleet of 80 vessels that transport crude oil and petroleum products around the world. Five of its tankers are currently stuck in the Persian Gulf due to the closure of Hormuz, Barstad said.

Traffic through Hormuz will not return anytime soon to prewar levels when 130 to 140 vessels crossed daily, Barstad said. But a credible deal between the U.S. and Iran should lead to a material increase above the trickle of five to 10 ships currently transiting the strait daily, the CEO said.

Some shipping companies have positioned tankers close to the Gulf in order to cash in on a reopening of Hormuz, Barstad said. Frontline has not positioned vessels for an opening, he said.

“Certain actors are positioning themselves purely commercially to try and be near this kind of opening scenario,” Barstad said. “You could say keeping the ship is like holding on to a call option on something that might happen.”

But it is far from clear whether the U.S. and Iran will reach an agreement as the security situation remains volatile. President Donald Trump threatened to bomb Iran Thursday night only to abruptly cancel the planned attack citing discussions with the Islamic Republic.

It has become a familiar pattern. Trump threatens a major escalation only to pull back and claim a deal with Iran is near. The cycle then repeats itself.

“Every week coming into the weekend, we’re very close to solution here and then every Monday we get disappointed,” Barstad said. Shippers will eventually grow tired of positioning themselves for an opening that doesn’t materialize and have to decide whether to send their tankers elsewhere, he said.

When Hormuz opens

About 10% of the world’s biggest tankers, the very large crude carriers, are stuck in the Gulf right now loaded with oil, Barstad said. Each of those vessels can carry up to around 2 million barrels. These will be the first batch of ships that exit Hormuz when there is an opening, he said.

The Gulf states are desperate to export crude because their storage is full and the disruption in the strait has been a huge cash drain for them, the CEO said.

“You’re going to get a lot of oil that moves on to water,” Barstad said. But there will be some logistical challenges to loading the oil the Gulf states want to export, he said.

The tanker fleet has been dispersed all around the world to fetch oil from regions like the U.S. Gulf Coast while Hormuz is closed. Saudi Aramco CEO Amin Nasser…