VLCCs Could be Set for a Stellar 2025

The VLCC tanker market could be primed for a very good year, in terms of performance. In its latest weekly report, shipbroker Gibson said that “VLCCs are enjoying a moment in the spotlight. A low orderbook and sanctions news have put a spotlight on the largest asset class in the tanker markets. However, the outlook for VLCCs has been promising before and freight rates have consistently underwhelmed. Is it finally time for VLCCs to shine? First, let’s have a look at the supply side. Just one VLCC was delivered in 2024, marking a record low, with only 6 to follow this year, which equates to just 0.1% and 0.7% of the total fleet, respectively. The orderbook for 2026 and beyond has grown, with 32 deliveries in 2026 and 41 in 2027. Yet these numbers are largely in line with historical values, with on average 35 VLCCs being delivered each year over the last 10 years.

According to Gibson, “meanwhile, the fleet is rapidly aging. Of the total VLCC fleet, 35% are 15 years old (built before 2010), and 16% over 20 years old (built before 2005). Beyond 20 years of age, vessels are difficult to insure in the conventional market and some counterparties will not accept vessels beyond even 15 years old. Further, a significant share of VLCCs aged 15+ are part of the grey fleet. With the latest round of OFAC sanctions, these ships have once again been the center of attention, as now 47% of the around 200 VLCCs in the dark fleet are sanctioned. Most of these vessels by far are involved in the Iranian and Venezuelan trade, with 67% of these ships over 20 years old”.

“A second tailwind comes in the form of sanctions. Recently, Shandong Port Group announced that they are no longer accepting sanctioned vessels (see our report here), and Shandong has been a hub for Iranian crude delivered on grey fleet VLCCs to independent refiners in China. Preliminary data suggests Iranian crude exports averaged 1.35mbd in January, flat year on year although it may take several months to observe the true impact of the latest sanctions and Shandong Port Group announcement. Trump is expected to tighten sanctions on Iran further in a repeat of his previous administration’s “maximum pressure” policy, which could bring barrels back to the conventional market (if OPEC plays along), benefitting VLCCs. The latest round of OFAC sanctions adds further support to the VLCC market, even if the initial rate rally proved unsustainable. Reactions from buyers so far have been mixed, with Indian refiners especially sourcing more cargoes from the Atlantic, leading to a much-needed boost to VLCC freight rates; yet, also announcing that they will keep buying Russian barrels at a “reasonable” discount, despite sanctions. Further sanctions on Russia and especially Iran are on the cards, with uncertain implications, though likely with upside to VLCCs”, the shipbroker added.

“Third, supply growth is expected to accelerate in 2025. The IEA is projecting 900 kbd of oil supply growth (including NGLs) in the Americas, mostly out of the US, Guyana, Canada, and Brazil. Yet, with demand growth for crude in the Americas tepid, this new supply is destined for export to Asia, a substantial share of which is expected to be carried on VLCCs, supporting tonne mile demand”, Gibson said.

“Thus, several factors have aligned to promise a good year for VLCCs. However, whilst the outlook has improved, expectations were also high for VLCCs in 2024, and freight rates somewhat underperformed. Oil demand expectations in 2024 were consistently revised downwards throughout the year, with especially Chinese demand growth failing to meet expectations due to poor industrial activity and a sharp rise in new energy vehicle (NEV) fleet sizes. In 2025, supply growth is projected to outstrip demand growth by 400 kbd, excluding any OPEC+ increases. Moreover, with economic growth projected to slow with expectations of widely imposed tariffs by the Trump administration, the outlook is not entirely rosy. Factors such as the US refilling it’s SPR “right to the top”, higher OPEC+ output at the expense of US production and uncertainty over the demand outlook all pose a threat. Further uncertainty is added by the potential reopening of the Red Sea to tankers and future efforts to end the war in Ukraine. President Trump, as ever, remains a geopolitical wildcard that cannot be ignored. Nevertheless, the outlook for VLCCs seems better than it has been in years, though with a few clouds on the horizon”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide