The US government’s 60-day waiver could improve regional supply logistics, but the incremental demand for international tankers is expected to remain limited. Freight rates are surging on the imminent need to transport products, but a prolonged disruption of the Strait of Hormuz could lead to a correction.

On 18 March, the White House announced a 60-day waiver of the Jones Act, allowing foreign-flagged tankers to transport crude oil and refined products between US ports. The measure is intended to ease surging product prices by temporarily expanding shipping availability for domestic coastal movements.

Jones Act fleet tightness at a 2-year high

The decision comes at a time when the Jones Act tanker fleet is already under significant tightness.In the CPP segment, this was driven by increased demand for middle distillates along the US West Coast (PADD 5) following two refinery closures (Wilmington and Benicia refineries). As a result, utilisation of Jones Act tankers carrying clean and dirty petroleum products has risen to the highest levels seen in the past two years, highlighting the strain on the domestic fleet.

Prior to the waiver, traders had already been using a workaround to move products to the West Coast. This involved shipping gasoline blendstocks from the US Gulf to the Bahamas on foreign-flagged vessels, where some blending takes place before the cargo is shipped onwards to the US West Coast. As the cargo is processed outside the US, the shipment can return to the US on foreign-flagged vessels without breaching Jones Act rules. While effective, this structure adds additional cost and time due to the complexity of the supply chains.

Limited employment upside for tankers

At this stage, the precise scope of cargo eligibility, permitted routes and how the 60-day window will be structured remains unclear. The most exposed or high-risk US imports which would need to be satisfied domestically, are the ones stemming from Asia, as refiners in the regions are reportedly cutting down runs. These are gasoline and jet fuel cargoes arriving from Asia and the wider Arabian Sea region, with imports from South Korea being a primary focus.

For crude oil around 500kbd of US imports are reliant on the Middle East. Nevertheless, any displacement due to the Strait of Hormuz closure will primarily be replaced by imports and not domestic arrivals; primarily with barrels arriving from Canada, Latin America or the Caribbean. A potential additional 80 kbd flows for ANS crude from Alaska to West Coast refineries would only result in one Suezmax per month.

If international tankers were used to satisfy the incremental US-intra product flows enabled by the waiver, the additional employment generated would be relatively limited as well. Our data suggest that this would equate to around 20 MR2 tankers. At the same time, current tracking shows more than 30 tankers without a fixture heading to the PADD 3 but not yet arrived, which suggests that available supply may already be more than sufficient to cover the requirement.

Atlantic freight continues to rise, as the market rush to secure cargoes

Post the announcement of the waiver, MR freight rates in the US Gulf have shot to historical highs. However, the support for rates does not come solely from cargo availability in the US. In contrast to a m-o-m drop in the Pacific Basin (excl. West of Hormuz), motor fuel liftings from the Atlantic overall have risen to record highs. This has evidently triggered a mass migration of vessels from the Pacific towards the Atlantic Basin, having tripled from January 2026 levels.

The need to imminently move barrels to supply regional markets — as reflected by the seasonal record high of clean product cargoes currently in transit — are supporting freight rates for the time being. The outlook becomes more uncertain if disruptions around the Strait of Hormuz persist. A continued inflow of vessels into the Atlantic Basin would eventually lead to a vessel (vessel supply-side) driven imbalance, exerting downward pressure on freight rates.

The alternative scenario is that the imbalance develops from the cargo (vessel demand-side). Surging fuel prices, reflecting an underlying supply crunch, could rise to levels that trigger a meaningful demand destruction, ultimately helping to rebalance the market. Current transit levels, combined with a sharp 20% decline in CPP floating storage in March, suggest that market participants are moving quickly to secure supply rather than taking a more cautious approach. This behaviour indicates that the impact of the supply crunch could become visible earlier than previously expected.

In either case, under a prolonged closure of the Strait of Hormuz, the key question for freight markets would therefore be less about whether rates will decline, and more about when and how quickly this correction materialises.

Source: Vortexa