Crude Tanker Market Driven by Fragile China and Resilient India

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  • VLCC supply tightens amid ageing fleet and limited renewal.
  • China’s crude imports rise on stockpiling, not consumption.
  • Refining overcapacity and EV growth weaken China’s demand outlook.

The crude tanker market saw a significant boost in September, with rates hitting their highest points in years. This surge was fueled by increased crude imports from Asia, thanks to USG-Asia arbitrage flows that ramped up ton-mile demand. Stockpiling and pre-winter procurement also played a big role in driving shipments. On the other hand, OPEC+ has been gradually increasing production, adding more cargoes to the market, while competitive pricing has prompted refiners in China and India to quickly secure their barrels, reports Break Wave Advisors.

Supply Tightness and Fleet Dynamics

This spike in demand has put a lot of pressure on VLCC supply, which is already tight due to rising inquiries and long-haul voyages that have cut down the number of vessels available for active duty. Several structural factors are making this situation even more challenging:

  1. The VLCC fleet is expected to stay mostly flat through 2025.
  2. The average age of vessels has climbed to 13 years, compared to a historical average of around 10.
  3. About 20% of the fleet is over 20 years old.
  4. Fleet renewal is lagging, with the orderbook-to-fleet ratio sitting at 12.3%, below the historical average of 18%.

These circumstances raise an important question: Is the current market strength just a temporary spike, or are we witnessing the start of a more sustained upcycle?

China: Rising Imports Amid Fragile Fundamentals

In September, China’s crude imports increased by roughly 6.5% year-on-year, primarily sourced from the Middle East, along with additional volumes from Brazil, West Africa, and Russia. Imports through Indonesia also indicate ongoing flows of Iranian crude.

However, the sustainability of this rise is questionable:

  1. The increase is largely driven by strategic stockpiling at competitive prices, rather than domestic consumption.
  2. China’s refining sector faces overcapacity and weakening fuel demand.
  3. NEV adoption and the broader energy transition are reducing fuel consumption.
  4. Beijing’s push for industry consolidation and tighter compliance rules is squeezing margins at smaller “teapot” refineries.

As a result, China’s crude import growth is projected to slow, from 2% in 2025 to just 1% in 2026, against a backdrop of weakening GDP growth (slowing from 5% in 2024 to 4.9% in 2025).

India: Resilient Demand and Export-Driven Growth

India’s crude imports are holding strong, thanks to a surge in refining activity and increasing domestic consumption. Here are some key highlights:

  1. High-Speed Diesel exports jumped by 23% year-on-year in August.
  2. Overall summer fuel exports saw a 15% year-on-year increase.
  3. In September, about a third of imports came from Russian oil, helping refiners stay competitive in both local and international markets.

Additional supplies were sourced from the Middle East, the U.S., and Nigeria.
On the policy front, several initiatives are boosting demand:

  1. The ethanol blending program has raised the ethanol content in gasoline from 12% to 20%, allowing more crude to be available for exports.
  2. Crude imports and product exports are expected to grow by around 5% annually in 2025 and 2026.
  3. India’s promising growth outlook is fueling this trend. The OECD has upped India’s 2025 GDP forecast to 6.7% from 6.3%, driven by strong domestic demand and ongoing reforms, which reinforces expectations for steady oil imports.

Outlook: Diverging Demand Profiles

Both China and India are playing significant roles in the crude market, but their demand profiles are quite different:

  1. China’s demand seems a bit shaky, bolstered by stockpiling but hampered by slowing economic growth, overcapacity in refining, and the swift rise of electric vehicles.
  2. In contrast, India’s demand appears more stable, backed by expanding refining capabilities, efficiency-driven policies, strong export performance, and a more optimistic growth outlook.

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Source: Break Wave Advisors