VLCCs in vogue

VLCCs are enjoying a moment in the spotlight. A low orderbook and sanctions news have put a spotlight on the largest asset class in the tanker markets. However, the outlook for VLCCs has been promising before and freight rates have consistently underwhelmed. Is it finally time for VLCCs to shine?

First, let’s have a look at the supply side. Just one VLCC was delivered in 2024, marking a record low, with only 6 to follow this year, which equates to just 0.1% and 0.7% of the total fleet, respectively. The orderbook for 2026 and beyond has grown, with 32 deliveries in 2026 and 41 in 2027. Yet these numbers are largely in line with historical values, with on average 35 VLCCs being delivered each year over the last 10 years. Meanwhile, the fleet is rapidly aging. Of the total VLCC fleet, 35% are 15 years old (built before 2010), and 16% over 20 years old (built before 2005). Beyond 20 years of age, vessels are difficult to insure in the conventional market and some counterparties will not accept vessels beyond even 15 years old. Further, a significant share of VLCCs aged 15+ are part of the grey fleet. With the latest round of OFAC sanctions, these ships have once again been the center of attention, as now 47% of the around 200 VLCCs in the dark fleet are sanctioned. Most of these vessels by far are involved in the Iranian and Venezuelan trade, with 67% of these ships over 20 years old.

A second tailwind comes in the form of sanctions. Recently, Shandong Port Group announced that they are no longer accepting sanctioned vessels (see our report here), and Shandong has been a hub for Iranian crude delivered on grey fleet VLCCs to independent refiners in China. Preliminary data suggests Iranian crude exports averaged 1.35mbd in January, flat year on year although it may take several months to observe the true impact of the latest sanctions and Shandong Port Group announcement. Trump is expected to tighten sanctions on Iran further in a repeat of his previous administration’s “maximum pressure” policy, which could bring barrels back to the conventional market (if OPEC plays along), benefitting VLCCs. The latest round of OFAC sanctions adds further support to the VLCC market, even if the initial rate rally proved unsustainable. Reactions from buyers so far have been mixed, with Indian refiners especially sourcing more cargoes from the Atlantic, leading to a much-needed boost to VLCC freight rates; yet, also announcing that they will keep buying Russian barrels at a “reasonable” discount, despite sanctions. Further sanctions on Russia and especially Iran are on the cards, with uncertain implications, though likely with upside to VLCCs.

Third, supply growth is expected to accelerate in 2025. The IEA is projecting 900 kbd of oil supply growth (including NGLs) in the Americas, mostly out of the US, Guyana, Canada, and Brazil. Yet, with demand growth for crude in the Americas tepid, this new supply is destined for export to Asia, a substantial share of which is expected to be carried on VLCCs, supporting tonne mile demand.

Thus, several factors have aligned to promise a good year for VLCCs. However, whilst the outlook has improved, expectations were also high for VLCCs in 2024, and freight rates somewhat underperformed. Oil demand expectations in 2024 were consistently revised downwards throughout the year, with especially Chinese demand growth failing to meet expectations due to poor industrial activity and a sharp rise in new energy vehicle (NEV) fleet sizes. In 2025, supply growth is projected to outstrip demand growth by 400 kbd, excluding any OPEC+ increases. Moreover, with economic growth projected to slow with expectations of widely imposed tariffs by the Trump administration, the outlook is not entirely rosy. Factors such as the US refilling it’s SPR “right to the top”, higher OPEC+ output at the expense of US production and uncertainty over the demand outlook all pose a threat. Further uncertainty is added by the potential reopening of the Red Sea to tankers and future efforts to end the war in Ukraine. President Trump, as ever, remains a geopolitical wildcard that cannot be ignored. Nevertheless, the outlook for VLCCs seems better than it has been in years, though with a few clouds on the horizon.

VLCCs turning 20 vs new deliveries

Crude Oil

East

VLCC owners enjoyed a better than expected week as rates have firmed day-by-day despite the holidays in the East for the Lunar New Year.  The main impetus was led by some replacement fixtures, which had a knock-on effect on sentiment. Owners anticipate further gains next week when charterers return to the office. Another positive indicator is the tonnage list appears to be thinning as tankers head West, with the Atlantic market showing improvement in both freight rates and activity. Today we are calling AG/China WS61 and AG/USG at WS35 on 2025 flats.

The AG Suezmax market is looking firm, where the list has thinned out rather rapidly throughout the week. It’s yet to be tested but East runs are looking around 140 x WS57.5 level via C/C for modern approved tonnage. For East runs, there are still a few ships around, but the list is not looking as charterer friendly as it was at the beginning of the week. Expect owners to be looking to push above 130 x WS112.5 next week.

A steady week for Aframaxes in the East. The list lacks quality; yet, only a steady flow of enquiry keeps rates in check. AG/East should be around 80 x WS145-150, although less has been done by a few weaker owners in the region.

West Africa

VLCCs in West Africa had a bit of resurgence this week, as increased activity especially on eastern runs had a positive impact on rates. The question now is whether owners can push on and make further gains next week. A lot will depend on activity in adjacent zones, which is expected to increase, in the USG. The tonnage availability for natural dates remains balanced but it is noticeable that a majority of the ships are controlled by a small number of owners that stay in the AG so that will have an impact which way it goes.  Today we are calling WAF/East on the region of WS61.5 but this needs a fresh test as we are seeing a quiet end to the week.

Suezmax markets in West Africa are firm and there are quite a few charterers being given a tough time by owners. For a TD20 run owners are ever more ambitious with their expectations and will be looking to push the market over 130 x WS85 next week. 

Mediterranean

Med enquiry for Suezmaxes has remained limited, though with better enquiry in the Atlantic basin providing an opportunity to ballast out of the Med, rates remain firm. TD6 today owners will be looking to maintain the WS90 levels we saw fixed last, but WAF has fallen away since those were done so charterers may attempt to push for a touch less. Rates for an East run have also firmed marginally with a few that were keen being picked off during the week.

A lackluster week for Aframax owners too, with all hope pinned to the other side of the pond. The week started with a vanilla Ceyhan being concluded at WS122.5. However, with little else to come in the following days, WS120 was soon done for a Libyan loader with a decent flat rate. Shorter voyages attracted the usual premiums of 10 to 15 points but in the main rates stayed in this range. CPC loaders theoretically were in the low WS130s, apart from the surprise in store when a replacement was sought off a very tight date. This achieved WS160. We end the week hoping for a more serious rebound in the US Gulf, which may help in attracting more ballasters from Europe and thus thinning availability into the next week. Aside that, only further bad weather seems to give owners any reason for optimism. 

US Gulf/Latin America

USG exports have seen more activity this week as favourable pricing on WTI makes it more attractive for eastern buyers. However, while we have seen VLCC rates move up, the increase has been limited and at a slower pace. It is also date-dependent. Yet, this could change next week, especially if we see more volume from other zones, which is expected by many. Brazil export cargoes have increased this week and even though the dates are now well into March, the quoted cargoes have not been inundated with large numbers of offers, so owners remain confident we could see further improvement next week. Today we are calling USG/China $8.75m and Brazil/China at WS59.5.

Aframaxes in the USG started off super bullish (WS160+ offers) with early week cargoes that eventually worked different angles to avoid the bull run. Some cargoes went on Suezmaxes, some were sold fob and VL’d up while the remaining ones worked slowly to maintain a market around the 70 x WS130 level.

North Sea

Another week another crabwalk. The weather took up a fair bit of dialogue as delays had some beneficial impact for owners. Levels remain at WS110 and with the February programme still looking as thrilling as January’s we aren’t predicting much of a change in the medium term.

Crude Tanker Spot Rates (WS)

Clean Products

East

The MRs east of Suez have experienced a much busier week this week where in two days trading some 25 ships were put on subs covering various routes. TC17 has been the main driver where rates have found a floor at WS185 and with short hauls being more competitively priced on the LR1s x AG dipped below the $200k level. Despite some failing subs the list going into the first decade of February looks tight.

As expected, a relatively quiet week from the outside as Chinese New Year and public holidays slowed things down. Off market deals have helped the list ticking over. However, overall, the LR1s have plenty of tonnage available and the LR2 have a number of NBs that have led to a disparity on rates. TC1 we assess to be bottoming out at 75 x WS130 and UKC at the $3.7m levels. TC5 was retested to 55 x WS130 and UKC at $2.6m. Expect that next week will see a flurry of activity as all markets come back online.

UK Continent

A real mixed bag of results seen this week for owners and charterers alike, with rates and momentum shifting almost each day. We started relatively slow with TC2 dipping to 37 x WS140 and as we reached Wednesday morning we anticipated further decline to be on the cards. Yet, a jump in quoted stems, coupled with a number of ships suddenly disappearing off our list due to private cargoes, suddenly turned momentum back to owners and the few ships left started to flex their position. The rest of the week has been full of further stems looking to remain quiet as well as owners talking some bullish ideas. Come Friday, we manage to sit around the WS145 mark for TC2 and around 20-25 points more for WAF. Cargoes are still out there to be covered and with tonnage still on the thin side, we could well see some further improvement before the week closes. 

Steady demand has been seen this week for Handies in the North but fresh Monday tonnage lists showed a good amount of ships to clear for the 1-5 window. Charterers have targeted vessels under the radar for private stems, which has seen freight for TC23 dip to 30 x WS175. Improved demand down to the Med towards the back end of week as that sector closes at 30 x WS165. Steady for the short-term.

Med 

It’s been a bit of a mixed bag for the Handies here in the Med this week, with rates under pressure from the off but fast-forward to the present and this could be taking a turn. We came into week 5, with XMed trading at the 30 x WS225 mark; yet, with nothing outstanding Monday morning rates soon came under pressure, with levels sinking as low as 30 x WS160 by Thursday. In this time, however, there was a good amount of fixing action which has cleared out a lot of the front-end. At the time of writing, we have seen three fresh cargoes come into play and with a cabotage cargo forcing rates to bounce back up, owners will be positive with their ideas into the weekend. Potential.

Finally to the Med MR market, where despite some consistent fixing activity rates have come off this week. 37 x WS150 Med/TA is where we left rates on Friday but with fresh lists showing a build-up of tonnage over the weekend, rates soon softened. Fast-forward to the present and we now see Med/TA trading at 37 x WS130, with WAF tracking at a 20-point premium. Heading into the weekend only one cargo remains but with TC2 trading at 37 x WS145, it is likely we have reached the bottom here in the Med.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Last week finally brings an end to soft sentiment in the North and sliding levels for now. For owners, it will feel like the year has finally started. Activity began the week in a more positive fashion with a handful of deals on Tuesday seemingly bringing cargoes out of the woodwork as the next day, a flurry of activity quickly clipped units from the top of the list. A combination of consistent activity, thinning of naturally positioned tonnage and bad weather WMed has given owners the leverage needed to kick rates on. We started the week with XUKC runs fetching 30 x WS162.5 but by week’s end, levels had firmed up to 30 x WS170. Looking ahead to next week, should we see light replenishment of naturally positioned tonnage, levels here could firm further due to a general lack of available tonnage to work.

In the Med, we saw a more subdued start to the week as off-market deals began to push the market down towards the 30 x WS130 mark for an XMed voyage. But under the radar activity continued to clip well-approved units from the list helping to rebound to a reported equivalent of 30 x WS135. Owners will feel positive heading into the weekend and will be hoping for light replenishment if this recent upward pressure is to persist.

MR

MR owners will be pleased with the past week in the North. The week’s trading has seen multiple deals at full stem having a yo-yo effect on rates. Levels were tested down at 45 x WS110 for XUKC runs where levels held, but as tonnage continued to be clipped away, owners began to kick levels back upward. Ideas of freight currently sit slightly above last-done due to a lack of units. We think 45 x WS115-120 will likely be the numbers owners ask for early next week.

Despite an overall better feel to the Med, MR owners won’t see it that way basis full stem. Enquiry has been relatively scarce, and levels have been tested down to a reported 45 x WS105. Available tonnage skews EMed as WMed tonnage has mainly been called upon for UKC loads. Should enquiry surface in the east, there is a feeling that levels could repeat as owners will want to dig their heels in.

Panamax

A quiet week for Panamax owners in Europe with little by way of fresh enquiry. Tonnage sits ready and waiting but with a soft USG/Caribs market, owners are not super keen to ballast on spec like we usually see. Flat surrounding Afras in the North are currently pro-rating at 55 x WS101 which could leave current ideas of WS 110-115 for voyages into the USG slightly overvalued, but a fresh test is needed to determine a new benchmark. A week to forget for owners in the USG/ Caribs market as available tonnage gets clipped away at slightly less than last done keeping levels trending down. There is, however, some light at the end of the tunnel as surrounding Afra markets begin to warm perhaps leaving the Panamaxes a more attractive option to charterers.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)

wk on wk changeJan 30thJan 23rdLast Month*FFA Q4
TD3C VLCC AG-China WS660544763
TD3C VLCC AG-China TCE $/day8,00039,25031,25024,25037,500
TD20 Suezmax WAF-UKC WS481776384
TD20 Suezmax WAF-UKC TCE $/day2,75026,75024,00015,75025,750
TD25 Aframax USG-UKC WS13129115130137
TD25 Aframax USG-UKC TCE $/day5,25026,50021,25026,25025,000
TC1 LR2 AG-Japan WS-14126140132 
TC1 LR2 AG-Japan TCE $/day-4,50026,50031,00028,250
TC18 MR USG-Brazil WS2168166161178
TC18 MR USG-Brazil TCE $/day50018,25017,75016,50017,750
TC5 LR1 AG-Japan WS-16124139156132
TC5 LR1 AG-Japan TCE $/day-3,75015,50019,25024,00015,250
TC7 MR Singapore-EC Aus WS-6168174161177
TC7 MR Singapore-EC Aus TCE $/day-1,00015,75016,75014,50016,500

(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis

Bunker Prices ($/tonne)

wk on wk changeJan 30thJan 23rdLast Month*
Rotterdam VLSFO  +2544542532
Fujairah VLSFO  -11569580561
Singapore VLSFO  -12586598570
Rotterdam LSMGO  -40660700659

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