The VLCC market is currently experiencing a period of heightened attention due to a combination of factors, including a low orderbook and the impact of sanctions. However, despite this positive momentum, the VLCC market has historically shown a tendency to underperform expectations, according to Gibsons.
VLCC Supply
VLCC supply remains relatively constrained. 2024 saw a record-low delivery of just one VLCC, with only six deliveries expected this year. While the orderbook has grown for 2026 and 2027, it remains within historical norms.
The aging VLCC fleet poses a significant challenge. 35% of the fleet is over 15 years old, and 16% is over 20 years old. These older vessels face difficulties with insurance and may not be accepted by all charterers. Moreover, a significant portion of the older fleet constitutes the “grey fleet,” which has been impacted by recent OFAC sanctions.
Recent sanctions on Russian crude oil have provided a tailwind for the VLCC market. The Shandong Port Group’s decision to no longer accept sanctioned vessels has disrupted trade flows. While the initial rate rally proved unsustainable, the impact of sanctions on Russian and Iranian crude exports is expected to continue to support VLCC demand.
Increased oil supply growth in the Americas, particularly from the US, Guyana, Canada, and Brazil, is expected to drive VLCC demand. This new supply is primarily destined for export to Asia, further bolstering tonne-mile demand for VLCCs.
Despite these positive factors, it is crucial to acknowledge that oil demand growth in 2024 fell short of expectations, particularly in China. In 2025, while supply growth is projected to increase, it is expected to outpace demand growth by 400 kbd, excluding any potential OPEC+ production increases. This imbalance presents a potential headwind for the VLCC market.
Crude Oil
The VLCC market experienced a positive week in the East, with rates firming despite the Lunar New Year holidays. Replacement fixtures boosted sentiment, and the tonnage list is thinning as vessels head West. AG/China rates are assessed at WS61, and AG/USG at WS35. The AG Suezmax market is firming with limited vessel availability. Eastbound rates are expected to exceed 130 x WS112.5 next week.
East
The Aframax market in the East saw steady activity but limited rate increases due to a lack of quality tonnage. AG/East rates are estimated around 80 x WS145-150.
West Africa
In West Africa, VLCC rates have rebounded due to increased activity in eastern runs. The TD20 route (Nigeria/UK Continent) gained 4 points to WS80.94. The TD27 route (Guyana to UK Continent) climbed 3 points to WS74.44. Suezmax rates in West Africa are firm, with owners aiming for rates above 130 x WS85 next week.
Mediterranean
Mediterranean Suezmax enquiry remains limited, but rates are firm due to better Atlantic activity. TD6 rates are expected to hold around WS90. Aframax rates in the Mediterranean are also subdued, with limited activity and weak demand.
US Gulf
In the US Gulf/Latin America, increased US exports have driven modest rate increases for VLCCs. Brazil export cargoes have increased, but limited offers suggest potential for further rate improvements next week. USG/China rates are assessed at $8.75 million, and Brazil/China at WS59.5.
Clean Products
East
The East of Suez MR market experienced a busy week with significant trading activity. TC17 rates found support at WS185, while short haul rates on LR1s dipped below $200,000. Despite some failed fixtures, the tonnage list tightened, suggesting potential for further rate increases next week.
UK
The UK Continent market witnessed mixed results. Initial weakness in TC2 rates was reversed due to increased stem activity and limited available tonnage. Rates for TC2 rebounded to around WS145.
North Atlantic
The North Atlantic Handysize market experienced subdued activity early in the week. However, demand improved towards the end of the week, with rates for TC23 dipping to 30 x WS175 and Med rates stabilizing at 30 x WS165.
Med
The Mediterranean MR market experienced mixed results. Initial weakness in rates was followed by a rebound due to increased fixing activity and a tightening of the tonnage list.
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Source: Gibsons
