According to Breakwave advisor’s highlights, the VLCC market gained momentum in October as geopolitical unrest in the Middle East and winter demand fueled higher spot rates across both Eastern and Western markets. Despite fluctuating oil prices and an influx of new tonnage, positive sentiment among shipowners is expected to keep rates firm through Q4.
Regional Market Trends
The third week of October saw firmer sentiment in the VLCC market across both East and West regions, driven by geopolitical tensions in the Middle East and upcoming winter demand. Although oil prices have eased, unrest has disrupted market dynamics, causing shipowners to hold back cargoes, tightening availability, and boosting spot rates.
- East Market: Rates from the Middle East to China rose by ~5% month-over-month, despite the arrival of new tonnage.
- West Market: VLCC rates rebounded, spurred by demand from India and Europe, with positive sentiment for Q4 driven by Petrobras’ plan to increase oil output.
Outlook and Geopolitical Impact
Renewed U.S. sanctions on Iran could tighten crude flows to China, forcing Chinese refineries to find alternative sources, particularly if tensions between Iran and Israel worsen. Meanwhile, the oil market remains on edge, with the possibility of a military strike in Iran heightening risks.
Despite China’s sluggish oil demand, tanker rates could benefit if oil prices shift into contango, mirroring the favourable conditions in 2015-2017. With a low vessel order book and ongoing geopolitical turmoil, volatility in spot rates is expected to support freight rates in the medium to long term.
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Source: Breakwave advisors
