VLCC Market Stabilizes on Eastern Routes Despite Weakening Global Oil Demand

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The global market for Very Large Crude Carriers (VLCCs) is currently showing signs of stabilization, particularly within Eastern trading routes. This positive shift is being driven by a combination of factors that are leading to firmer rates for owners, reports Breakwave Advisors. 

Significant Shift 

The Very Large Crude Carrier (VLCC) market is experiencing a significant shift in sentiment, moving towards a more constructive outlook for owners after several weeks of subdued spot activity. Confidence among owners has notably improved, allowing them to demonstrate firmer resistance to lower rates, and charterers are increasingly encountering a clearly defined rate floor.

Regional Dynamics:

  • East (Middle East Gulf – MEG) and West Africa (WAF) to Asia routes: These routes are currently at the forefront of the market recovery. Owners are witnessing a good level of inquiry for early June, combined with some late May stems, leading to tighter tonnage lists and upward pressure on rates.

    • For MEG/China, rates are currently assessed at WS63 and AG/USG at WS32. There’s optimism for further increases once UAE stems are confirmed.
    • WAF/East rates are also improving, though at a slower pace than the AG, currently assessed around WS63. Charterers are now looking at forward positions, but owners are resisting, aiming for similar returns to the AG.
  • Atlantic (especially US Gulf – USG): This region remains comparatively soft. Limited export activity from the USG and an ample supply of tonnage continue to weigh on transatlantic sentiment. However, there is growing market chatter about a handful of mid-June stems potentially emerging next week.

Weakening Oil Demand 

The global oil market faces significant headwinds, making an outlook of demand growth outpacing production challenging for the remainder of 2025. This is largely due to several bearish factors:

Weakening Chinese Oil Demand:

  • Persistent decline: Recent economic data from China indicates a sustained weakness in oil demand, with apparent demand in April falling by over 5% year-on-year.
  • Inventory build-up: Despite elevated oil imports, decreasing refinery throughput suggests that inventories are accumulating.
  • Accelerated transition: China, the world’s second-largest oil consumer, appears to be shifting to a less oil-intensive economy more rapidly than previously anticipated. The proliferation of electric vehicles (EVs), expansion of renewable energy sources, and advancements in energy efficiency are exerting downward pressure on the country’s crude oil demand at a faster pace. While demand for gas-linked oil for industrial production is expected to remain robust, the overall picture for crude oil demand from China is concerning.

Reduced Geopolitical Premium:

  • US-Iran negotiations: Ongoing negotiations between the US and Iran have contributed to a reduction in the geopolitical premium on oil prices. Any progress towards a nuclear deal could potentially unlock more Iranian crude supply, further easing market tightness.

OPEC+ Oversupply:

  • Increased output: OPEC+’s decision to increase output remains a significant bearish factor for oil prices, contributing to an oversupply scenario. This acceleration of production, even amid a weakening demand outlook, creates further downward pressure on prices.

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Source: Breakwave Advisors