Recent Middle East events highlight the significance of energy security, prompting charterers to pay premiums for vessel availability during geopolitical uncertainties.
VLCC Spot
Chinese charterers’ return after holidays, along with the fear of broader oil-exporting conflicts, boosted spot rates in Atlantic and Middle East markets, despite no major supply disruptions.
In spot-focused markets, reactions to Middle East turmoil stem from future uncertainty, not current conditions, due to long lead times. Atlantic market expects stable freight sentiment for the next month due to limited tonnage, making tanker vessels valuable assets in volatile times with no strong reason to be pessimistic.
Geopolitical Turmoil
Oil price fluctuations reflect sentiment-driven trading and supply-demand narratives. Prices surged to near $95 per barrel, dipped to the low $80s, and rebounded due to Middle East tensions. Tight market dynamics, OPEC+ cuts, and increased non-OPEC production create strong winter demand, benefiting the tanker industry.
Tanker Cycle
The tanker market is recovering from a long period of staggered rates as the growth in new vessel supply shrinks while oil demand is recovering in line with the global economy.
A historically low orderbook combined with favorable demand fundamentals should continue to support increased spot rate volatility, which combined with the ongoing geopolitical turmoil, should support freight rates in the medium term.
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Source: Breakwave
