The VLCC (Very Large Crude Carrier) market saw a strong recovery in the last week of August, capping a robust month of growth. This surge followed a dip in late July, with some rates increasing by nearly 10 points in a single day. This positive momentum is expected to continue into September, driven by a strong pipeline of new cargo flows. A key factor to watch is whether regional players or larger owner groups will absorb these volumes. Market sentiment remains firm, supported by a significant increase in Chinese crude imports in July, which rose to 11.11 million barrels per day.
Atlantic Basin Freight Dynamics
The strength of the VLCC market was also reflected in the Atlantic basin. Rates for routes like West Africa to China firmed up due to higher cargo demand from increased loadings in Nigeria and Iraq. This activity, combined with uneven OPEC+ compliance, gave owners a stronger bargaining position. While Brazil-to-China rates softened earlier in August, Brazil remains a crucial supplier outside of the OPEC+ framework, with steady Chinese demand for its crude supporting long-haul flows. Overall, the VLCC market ended August significantly stronger than it began, with all major routes showing double-digit growth. This confirms the view that factors like tightening vessel availability, strong Chinese imports, and geopolitical events are sustaining firm market sentiment.
Oil Market Fundamentals
Despite a substantial increase in global oil supply of about 2.5 million barrels per day over the past year, oil prices have remained relatively stable, declining by only about $5 per barrel. While demand has slightly exceeded initial forecasts, the market is still considered oversupplied. Chinese transportation fuel demand is flat, with only gas-related fuels showing notable growth. Although geopolitical risks and sanctions could cause disruptions, the market is currently well-supplied enough to absorb such shocks. From the tanker market’s perspective, rising oil exports are a clear positive, and any shifts in the oil forward curve could further support the large crude carrier segment.
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Source: Breakwave Advisors
