The VLCC market commenced April with a sense of cautious optimism, particularly in the Middle East. The early part of the month saw a moderate increase in chartering activity for cargo loading in the second decade of April. This uptick briefly boosted market sentiment, leading owners to hope that the positive trends observed in March would solidify into stronger freight rates, reports Breakwave Advisors.
Impact Of Trade Tensions
The global VLCC sector is facing increased geopolitical tensions and the potential for trade disruptions stemming from recently announced tariffs. Specifically, China’s imposition of a 10% tariff in February has already resulted in a significant decrease in U.S. crude oil imports by Chinese refiners.
Anticipating the possibility of crude oil becoming a direct target of further tariffs, Chinese buyers have begun to diversify their crude oil sourcing strategies. This involves increasing their reliance on supplies from the Middle East, Russia, Brazil, and West Africa to compensate for the reduced volumes of U.S. crude. This shift in sourcing patterns highlights the immediate impact of trade tensions on global oil trade flows and, consequently, on the VLCC market.
Oil Price Collapses
The past week witnessed a sharp decline in oil prices, primarily triggered by the unexpected announcement of global tariffs by the United States. This was compounded by a surprising upward revision in projected production from OPEC+, creating a confluence of factors that exerted significant downward pressure on oil prices.
More recently, a noteworthy shift occurred in the Brent crude futures market, where the spread between the December 2025 and December 2026 contracts briefly moved into contango. Historically, a contango market structure, where future prices are higher than spot prices, has tended to support stronger tanker rates.
The analysis suggests a potential strategic shift by OPEC+, particularly Saudi Arabia, possibly with the tacit support of the current U.S. administration, which seemingly favors lower oil prices. This new strategy is anticipated to focus more aggressively on defending market share, a departure from the price control efforts of recent years. This shift is likely to lead to considerably lower oil prices in the near term, posing challenges for numerous oil producers. However, it could also lead to a reduction in investment within the Western oil sector, which remains a crucial driver of future production growth.
From the perspective of the tanker market, the shape of the oil futures curve is identified as a critical determinant. Given the expectation of limited underlying growth in crude oil demand in the coming years, a contango structure in the oil market could be a catalyst for higher spot tanker rates.
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Source: Breakwave Advisors
