- A return to Suez Canal routing reduces ton-mile intensity for oil tankers but is mitigated by trade growth and U.S. sanctions.
- East-to-East and West-to-East oil trade volumes are growing, while intra-Atlantic trade faces declines.
- Despite a slight dip in ton-mile demand early in 2025, growth resumes by year-end, supporting tanker markets.
The global oil trade landscape is shifting in 2025 as geopolitical events, production changes, and sanctions reshape trade flows. While a return to Suez Canal routing may reduce the ton-mile intensity, evolving trade patterns and fleet adjustments create a cautiously optimistic outlook for tanker demand, reports Breakwave Advisors.
The Role of the Suez Canal
The ceasefire in Gaza has reduced Houthi rebel activity in the Red Sea, encouraging a return to pre-attack Suez Canal usage.
This impacts ton-mile intensity, with east-to-west trade expected to drop by 26% by April. However, West-to-East flows remain steady as Russian crude continues to find pathways to Asia despite sanctions.
Shifting Trade Volumes
East-to-East Growth: Crude trade within the East is projected to grow by nearly 1%, offsetting reduced Iranian exports with increased production from other Middle Eastern producers.
West to East Expansion: A 10% growth is anticipated, driven by Russian crude exports to Asia and surplus Atlantic basin crude.
East to West Rebound: Trade volumes could jump by 53%, returning to pre-Houthi attack levels, with more Middle Eastern oil and refined products heading to Europe.
Intra-Atlantic Decline: West-to-West flows may drop by 6% due to new refineries in the Atlantic basin and reduced European demand.
Impact on Ton-Mile Demand
Ton-mile demand is expected to dip by 1% in early 2025 as shorter routes dominate.
However, a 2% increase is forecast by the end of the year, as more ton-mile-intensive trade routes gain prominence.
Fleet Growth and Market Balance
Fleet growth is estimated at 1.3% in 2025, influenced by new deliveries and age-related vessel removals. U.S. sanctions have further tightened capacity by removing tankers from compliant trades.
Although this creates a short-term oversupply challenge, robust trade routes favor VLCCs and LR2s, supporting a modestly bullish outlook.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: Breakwave Advisors
