- Spot freight rates for VLCCs surged in September to near $100,000 per day, driven by strong Middle East exports, long-haul cargoes, and geopolitical pressures.
- China’s strategic crude imports and India’s diversification away from Russian barrels have added incremental demand for VLCCs.
- Fleet constraints, limited new deliveries, and sanctions on vessels further tighten the market, supporting high rates, though future momentum remains uncertain.
The recent rally in the VLCC sector is largely fueled by a sharp rise in Middle East exports. OPEC+ production increases have pushed exports above 18 mbpd, among the highest levels since 2023. Steady cargo flows, primarily destined for Asia, are creating strong demand for VLCCs, while the limited availability of vessels in the spot market intensifies competition and pushes freight rates higher.
Long-Haul Voyages Tie Up Vessels
Beyond export volumes, the origin of cargoes plays a crucial role. Crude shipments from the U.S. Gulf, Brazil, and West Africa are increasingly heading to Asia, keeping VLCCs occupied for extended periods. This reduces vessel availability for new charters, tightening the market further and supporting elevated spot rates.
China’s Strategic Storage Imports
China continues to play a pivotal role, importing crude primarily for storage even as domestic demand growth remains modest. These storage-driven long-haul shipments increase ton-mile demand, contributing to higher utilization of VLCCs.
India Diversifies Supply Sources
India’s shift away from discounted Russian crude, due to geopolitical pressures from the U.S. and EU, has led to greater reliance on Middle Eastern barrels and purchases from West Africa and the U.S. Gulf. This transition has added additional demand for VLCCs, which are now increasingly used instead of smaller Aframax or Suezmax vessels.
Sanctions and Regulatory Pressures
Sanctions have sidelined nearly 177 VLCCs—about 20% of the fleet—reducing flexibility in the market. Additionally, new U.S. Trade Representative regulations coming into effect in October 2025 will impose fees on Chinese-owned or operated tankers calling at U.S. ports, causing vessel repositioning and operational inefficiencies that further tighten supply.
Seasonal and Psychological Factors
September marks the end of peak local energy consumption in the Middle East, freeing up more barrels for export. Positive rate forecasts for 2025–26 have also boosted owners’ confidence, encouraging market optimism.
Fleet Constraints and Premium Vessels
Supply-side fundamentals remain bullish. VLCC deliveries are at historic lows, with only one vessel added in 2024 and two more in 2025 so far. The stagnation in fleet growth, combined with strong premiums for modern scrubber-fitted vessels due to fuel efficiency, has intensified market tightness.
Outlook and Considerations
While current rates are exceptionally high, the rally may not be permanent. Factors such as potential declines in China’s storage demand and the arrival of new VLCCs in 2026 could ease tightness. For now, the market enjoys a rare convergence of strong exports, limited fleet availability, and storage-driven demand, highlighting how quickly VLCC dynamics can shift. September 2025 underscored the sector’s volatility and the critical role of aligned market drivers in driving freight rates.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: Breakwave Advisors
