After a soft end to July driven by charterer-led pressure, the VLCC market has rebounded in mid-August, with the Middle East Gulf (MEG) leading the recovery. Stronger than expected late-August enquiries have helped absorb excess tonnage, lifting freight rates across key routes and improving sentiment for the remainder of the month.
Middle East Gulf Leads the Recovery
Early August saw a sharp rise in MEG activity, particularly on AG/China and AG/Singapore routes, where owners successfully pushed rates above early summer levels.
The tonnage overhang that had pressured the market earlier in the season has eased, while supportive fundamentals in West Africa are tempered by competition from the Suezmax segment. In the Atlantic Basin, US Gulf and Brazil VLCC trades have also strengthened on recent fixture momentum.
Oil Price Pressure from OPEC+ Output Growth
Despite firmer freight conditions, crude prices have slipped to two-month lows. OPEC+ production has increased by about 2.5 million barrels per day since March, with August and September adding over 1 million bpd combined. This supply boost, coupled with optimism around a resolution to the Russia-Ukraine conflict, has kept prices near the lower end of their recent range. While Chinese crude imports remain strong averaging 11.12 million bpd in July—global demand growth for transportation fuels is expected to stay modest.
The VLCC market’s mid-August rally reflects a tightening tonnage list and stronger MEG demand, supported by steady Chinese crude buying. However, the broader oil market faces downward price pressure from rising OPEC+ supply and limited demand catalysts. In the medium to long term, a low newbuilding orderbook, evolving trade patterns, and persistent geopolitical risks are expected to sustain rate volatility and underpin tanker earnings.
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Source: Breakwave advisors
