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Sanctions are turning tankers into temporary storage, and traders say it’s now visible at record scale. At ADIPEC this week, Gunvor’s chief executive said “oil on the water” has surged to unprecedented levels as restrictions on Russian and Iranian barrels keep cargoes offshore. Mercuria’s chief put a number on the effect: a 2026 surplus that might have reached about 2 million barrels a day looks closer to 1 million while those barrels sit at sea. For shipowners, that tie-up shrinks available tonnage and generally props up earnings, with the caveat that policy or enforcement changes can unwind the support quickly.
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Simple Summary in 30 Seconds
Sanctions on Russia and Iran have pushed a lot of oil to sit on ships offshore. Those barrels tie up tankers and shrink the pool of vessels that are free to fix. With fewer open ships, freight stays supported, especially on crude routes. The setup can flip if policy or enforcement changes and those barrels move ashore quickly.
What changed
More oil parked at sea under sanctions, especially near Asia.
Cost and time effect
Waiting and longer routes remove ship-days from the spot list.
Market signal
Tighter effective supply supports tanker earnings while storage lasts.
Bottom line: Barrels at sea help rates by keeping ships busy, but a quick unwind would add vessels back and cool freight.
Floating Storage Surge: Industry Impact
Item
Summary
Business Mechanics
Bottom-Line Effect
What happened (reported)
Gunvor says sanctions have created record volumes of oil held at sea, delaying a glut. Mercuria says a 2026 surplus nearer 1 mb/d vs 2 mb/d without sanctions.
Floating barrels absorb ship-days that would otherwise be available for fixtures.
📈 Supportive for owner earnings while storage persists; note policy risk.
Where barrels sit
Trackers highlighted Iranian floating storage shifting toward offshore China and SE Asia in 2025, alongside Persian Gulf positions.
Strategic loitering near demand centers shortens response time when buyers lift cargoes.
Available ships jump as storage unwinds and route inefficiencies shrink.
Spot lists lengthen; crude and some clean rates face pressure.
Owners with longer cover fare better during the step-down.
Curve watch
Storage economics improve when the forward curve is in contango large enough to cover ship hire, finance, bunkers, and operations. In backwardation, storage value erodes and the incentive fades.
Frequent anchorage clusters tied to sanctioned flows:
Off China: Bohai and East China Sea approaches
Malaysia–Singapore corridor
Persian Gulf holding areas
Locations shift as buyers, enforcement and logistics change.
Clean-to-Dirty Switches
What is happening
Dozens of LR2s have shifted from products to crude during late 2025 as crude returns outperformed.
Owner implications
Short-run: tighter clean lists and stronger LR earnings possible. Reversals require time and cleaning costs that should be priced into voyages.
Owner checklist
Balance spot and period cover to keep optionality as storage unwinds.
Audit KYC, AIS records and voyage documentation for sanction-exposed trades.
Track oil on water metrics and anchorage counts in SE Asia and off China.
Model switch costs and off-hire if pivoting LR2s between clean and crude.
Floating storage has become the pressure valve that keeps a visible glut at bay and quietly tightens tanker supply. As long as sanctions keep barrels offshore, freight remains underpinned by longer effective voyages and fewer open ships. It is a supportive, but fragile, equilibrium, poised to shift if policy or enforcement changes draw those barrels ashore.
