- Dirty Tanker Market Slumps Amid Shorter Oil Routes to Europe.
- WTI Loses Ground to African Crude in European Market Shift.
- Tanker Sanctions and Supply Shifts Pressure Freight Rates.
In May 2025, Europe experienced a significant 10% rise in crude oil imports. This increase is probably tied to several refineries coming back online earlier than expected after maintenance, which ramped up the regional demand for crude. More notably, the sources of these imports have changed quite a bit. There was a sharp rise in imports from West Africa, especially Nigeria, while North African countries like Libya and Algeria also saw substantial increases. These areas provide light sweet crude, leading to a temporary oversupply of this particular grade in the European market, reports Break Wave Advisors.
U.S. Exports Slow as Distances Shrink
The pivot towards African crude has brought about two key outcomes. First, it has caused a slowdown in U.S. crude exports to Europe, particularly for West Texas Intermediate (WTI), which is now facing heightened domestic demand and increased refining activity along the U.S. Gulf Coast. Second, the shorter shipping distances from West and North Africa to Europe have reduced tonne-mile demand, even though the overall craving for crude remains robust. Consequently, the dirty tanker market has softened, with fewer long-haul transatlantic trips leading to a decline in demand for larger vessel classes like VLCCs and Suezmaxes.
Price Gap Between WTI and Bonny Light Narrowing
The price gap between U.S. WTI and Nigeria’s Bonny Light crude is set to play a significant role in shaping European purchasing choices. By the end of May, Bonny Light was trading at about $66 per barrel, showing some recovery from earlier lows but still falling short of Nigeria’s 2025 budget target of $75. On the other hand, WTI was priced around $60.63 per barrel. While Nigerian crude has recently captured more market share in Europe, the lower price of U.S. light sweet crude could make American exports more appealing once again.
Sanctions are also tightening the tanker supply
The tanker market is feeling the squeeze from a fresh wave of sanctions imposed by the EU and UK on what’s known as the “extra-sanctioned” fleet. These new measures have led to a significant uptick in the number of restricted tankers, with mid-2025 seeing a notable increase in sanctioned vessels. Year-on-year, this fleet has ballooned by 248%, putting even more pressure on global tanker availability.
Freight rates are dropping across dirty tanker classes
Freight rates in major dirty tanker segments have plummeted. The Baltic Dirty Tanker Index (BDTI) has dropped 25% compared to the same time last year. A big part of this decline is due to the rising net supply in the Arabian Gulf, which has particularly impacted VLCC rates on routes to China. As summer approaches and oil supply continues to outstrip demand, the market is facing ongoing challenges. VLCC rates from the Middle East Gulf to China have fallen to WS 54, reflecting an 11% drop weekly and a 20% decrease monthly. Suezmax rates from West Africa to Europe are now at WS 80, down 30% since last month. The Baltic to Mediterranean route has also softened, with rates dipping below WS 98.
Clean Tanker Market Shows Resilience
The clean tanker market is showing some signs of bouncing back. Recently, LR2 rates for the Arabian Gulf route have climbed to WS 138. While this marks an 11% drop from last week, it’s still an 8% increase compared to a month ago. The tightening of vessel availability in the Arabian Gulf towards the end of May seems to be helping this gradual recovery.
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Source: Break Wave Advisors
