- VLCC earnings improve in early 2025 due to supply shifts, geopolitical risks, and long-haul demand from China and Brazil.
- Trade re-routing and reduced U.S.-China shipments reshape tonne-mile patterns.
- A tight newbuild orderbook and growing crude demand support continued market strength.
The very large crude carrier (VLCC) freight market experienced a notable upswing in the first half of 2025, outperforming the latter half of 2024. Despite global challenges, including tariff threats and geopolitical instability, the sector showed resilience and adaptability, according to Tankers International.
Tariffs Disrupt U.S.-China Trade Flow
The looming imposition of U.S. tariffs on China has impacted crude oil shipments, particularly long-haul VLCC liftings from the U.S. to China. These volumes have dropped significantly, resulting in decreased tonne-miles. Instead, U.S. crude is increasingly being exported via smaller tankers to nearby regions, leading to a contraction in total VLCC departures from the U.S.
OPEC+ Cuts and Regional Balances
OPEC+ voluntary production cuts remain a key factor in shaping tanker dynamics. Although production figures appear to be climbing, much of the growth compensates for past overproduction, and high local demand in the Middle East has limited the availability of barrels for export. Despite this, fixture activity in the Arabian Gulf is rising, and with declining seasonal demand expected, export volumes may rise in the second half of 2025.
Iranian Oil and Strait of Hormuz Tensions
Iran’s high export levels have contributed to ongoing market disruption. The renewed tensions between Iran and Israel—particularly around the Strait of Hormuz—have added insurance risks and created uncertainty in routing preferences. While a ceasefire has eased short-term pressure, the region remains volatile and could swiftly alter tanker demand and flows.
Brazil Emerges as Growth Engine
Brazil’s expanding crude supply, alongside sanctions on the shadow fleet and China’s tariffs on U.S. oil, have redirected VLCC demand toward South America. Brazilian crude exports to China are on the rise, benefiting tonne-mile metrics thanks to the extended voyage distances.
China’s Steady Crude Appetite
Despite domestic economic headwinds, China’s crude imports continue to trend upward. The end of its refinery maintenance season is expected to increase processing volumes. Additionally, mainstream VLCC flows to China from long-haul regions like West Africa and Brazil are rising. There’s also a decline in sanctioned tanker arrivals, boosting demand for regular VLCC tonnage.
Fleet Dynamics and Outlook
Although older VLCCs are being sold into the dark fleet, scrapping remains minimal, leaving the fleet size elevated. However, the pipeline for new vessel deliveries is limited. This tight orderbook, coupled with steady oil demand growth, underpins a positive outlook for the VLCC segment.
Looking Ahead
The second half of 2025 is shaping up to be strong for the VLCC market. Even with ongoing geopolitical concerns, shifting trade routes and export growth—especially from South America and the Arabian Gulf—are expected to support tonne-mile demand. As OPEC+ barrels re-enter the market and new tariffs steer trade patterns, the VLCC market is likely to maintain upward momentum in the months ahead.
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Source: Tankers International
