- VLCC and Suezmax earnings surge amid rising ton-mile demand.
- China and India shift sourcing, boosting mainstream tanker activity.
- EU’s 2026 refined product ban to reshape clean tanker flows.
Tightening Western sanctions on Russian oil have led to a significant spike in crude and clean tanker rates, particularly with winter demand and the upcoming EU Product Ban set to shift global cargo flows further. Western authorities have zeroed in on companies like Rosneft and Lukoil, and an EU ban on refined products made from Russian crude in third countries is slated for January 2026, reports S&P Global
Sanctions Driving Higher Freight Floor
According to Platts data, the Global VLCC Index for standard non-scrubber, non-eco vessels hit $119,807 per day on November 17, nearly double the rates seen before the sanctions were announced. Meanwhile, the Global Suezmax Index climbed to $63,136.65 per day, a significant jump from $36,620.14 per day in early October. “The rates are fluctuating, but the floor this year should be higher than what we saw in the past few years,” said Associated Maritime Managing Director Liu Hongjun. “This is more than seasonal demand. US sanctions on Russia are at play.”
With rising ton-mile demand driven by altered trade routes, Hengli Petrochemical International CEO Janet Kong said freight will remain elevated and volatile. “There’s no better time to be in the shipping industry,” Kong said. “If there are more sanctions, freight rates will go up.”
Changing Trade Patterns Boost Mainstream Tanker Demand
China and India, the leading buyers of Russian seaborne crude via shadow fleet tankers, have ramped up their purchases from the Middle East and Atlantic Basin, as indicated by CAS data. These longer voyages are driving up tanker utilisation. “This has obviously been tying ships up among the voyages … creating a multiplier for tanker earnings,” said Adam Lanning, senior tanker analyst at SSY.
Global floating oil volumes are nearing 2 billion barrels, the highest level in at least eight years. “At least to some extent, the oil that is now being sanctioned will be replaced by mainstream oil and therefore, creating additional demand for mainstream tankers,” said Giovanni Gavarone, Maersk Tankers’ director for Suezmax and Aframax pools. “We are reasonably optimistic that the sanctions have a positive impact on freight.”
EU Product Ban Set to Reshape Clean Tanker Flows
In the first half of the year, the EU imported 467,000 barrels per day of refined products from India and Turkey. With the impending EU ban on products derived from Russian crude, we could see a dramatic shift in trade patterns. “Indian oil that is being shipped to Europe will come under higher scrutiny and may be diverted to Latin America or Asia,” Lanning said. “This may increase overall product tanker ton miles. “Meanwhile, Middle East oil can be a straight swap for Indian products heading to Europe, so this presents a more neutral impact on the tanker market.”
This EU restriction may come into play just as Russia is keeping its product exports low due to sanctions and drone strikes on refineries, which is tightening availability and increasing demand for LR and MR tankers. CAS data shows Russian product exports at 1.99 million barrels per day in October, slightly above September’s multi-year low. “Already, the US Gulf MR market has witnessed the rally rates as more US oil has been diverted to countries such as Brazil in order to offset this decline in Russian imports,” Lanning said. Asian naphtha buyers may also cut Russian intake and turn to Middle Eastern supplies transported via mainstream LR and MR tankers.
Clean Tanker Rates Strengthen Across Segments
Clean tanker indices have seen an uptick across several key trade routes:
- MR Index: $20,429.86 per day
- LR1 Index: $23,017.89 per day
- LR2 Index: $36,066.02 per day
These increases highlight the growing demand for product tankers as global trade continues to adjust under the weight of expanding sanctions.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: S&P Global
