COSCO Shipping Energy fell more than 13% in Hong Kong on Thursday, and three mainland-listed tanker operators hit their 10% daily downward limits, after reports that Washington is weighing exemptions for blacklisted shadow fleet tankers. The sell-off marks a sharp reversal for a sector where some spot segments have crossed into million-dollar territory for the first time in history.

The trigger was news that the Trump administration is discussing Treasury approval for sanctioned tankers linked to Russia, Iran and Venezuela to carry oil and petroleum products that are not themselves subject to American sanctions. A US official told Reuters that companies would need Treasury sign-off to employ the vessels. The initiative aims to release additional tanker capacity and bring down record freight rates, though no formal easing has been announced.

US energy secretary Chris Wright raised the possibility in a video address to the World Petroleum Congress in Riyadh this week, according to consultancy Energy Aspects. The proposal follows Washington's decision last Friday to temporarily authorise Russian diesel trade until April 7, 2027 — a move that drew criticism from Kyiv and US lawmakers.

How big is the sanctioned fleet?

The tanker squeeze the proposal targets is unprecedented in scale. Clarksons Research estimates that 1,010 oil tankers totalling 121m dwt are individually sanctioned, representing 17% of global tanker capacity — roughly one in six tonnes of the world's fleet.

Despite that headline figure, analysts doubt the relaxation would meaningfully change tanker supply. Scandinavian bank SEB told clients on Thursday morning that any additional mainstream capacity would be limited, noting most sanctioned tankers are elderly and already trading.

"A small number of additional vessels for the Hormuz shuttle trade could help get more barrels to market, which would be positive," SEB said. The bank argued the more significant signal was Washington's willingness to intervene in freight markets, with high fuel prices posing a political risk ahead of November's midterm elections.

Would sanctioned tonnage actually return to trade?

Becky Smart, a research analyst at Singapore's Sentosa Shipbrokers, said Russian-linked tonnage looked a more plausible candidate for relief than Iranian-controlled ships, given continuing US pressure on Tehran. She questioned both the political wisdom and the commercial effectiveness of the plan.

"Removing sanctions from vessels previously targeted for involvement in Russian oil trades would unwind a significant amount of the work done to constrain Moscow's energy revenues," Smart said.

She also flagged the practical barriers to bringing ageing shadow fleet vessels back into mainstream employment.

"Major oil companies and most EU- or UK-aligned entities are highly unlikely to rush towards vessels that were sanctioned until five minutes ago," she said.

Many of these ships would struggle to meet the vetting, maintenance and insurance requirements of mainstream charterers and terminals. European and British sanctions would remain in force regardless of any Washington decision, further restricting a return to conventional trading.

"On paper sanctions relief adds tonnage, however, in practice it is unlikely to add genuinely usable fleet capacity," Smart concluded.

What does this mean for freight rates?

For shipowners, Thursday's rout shows how much of the current boom is priced on sanctioned-tonnage scarcity: the mere suggestion of relief erased double-digit share value across COSCO Shipping Energy, China Merchants Energy Shipping, its Shanghai peers and China Merchants Nanjing Tanker. The sell-off also spread beyond tankers into other shipping sectors.

For charterers and refiners, the immediate calculus barely changes. With SEB and Sentosa both sceptical that usable capacity will grow, and with EU and UK restrictions intact, the supply-side pressure on spot rates looks set to persist until any formal exemption regime clarifies which vessels clear Treasury review.

The market's next test is whether Washington converts Wright's Riyadh remarks into a formal licensing framework — or whether, as SEB suggests, the intervention signals a broader political willingness to cool freight and fuel markets ahead of November's midterms.