Maritime Strategies International (MSI) is tipping VLCCs to join the rest of the tanker sector in the black, but the company does not seem confident.
As it stands, average time charter equivalent rates assessed by the Baltic Exchange have VLCCs deep in the red as Chinese oil demand lags thanks to Covid-19 restrictions while suezmaxes and aframaxes are both earning above $20,000 per day.
In its monthly Horizon report, MSI said there was reason to believe VLCCs would improve as China eases restrictions — but that was no guarantee.
“The potential for reinstatement/expansion [of Chinese Covid-19 lockdowns] remains, placing continued risk around VLCC markets,” the advisory said.
MSI estimates that VLCC rates will rise through the end of this quarter, the next and the fourth, rising above zero in the next three months and finishing the year above $20,000 per day.
Meanwhile, suezmaxes, aframaxes, LR2 product tankers and MRs are all expected to cluster in the $10,000 per day to $20,000 per day range by the end of 2022.
The company said crude imports rose by 6.5% month-over-month in May to 45.8m tonnes, but that remains in the range established in mid-2020 following that year's oil price collapse, which never exceeds 50m tonnes.
It said another increase in Opec+ quotas would help, too.
But for VLCCs, China is key.
“Until we start seeing a sustained upward trajectory in China’s crude imports, we are unlikely to see VLCC spot earnings make major gains,” MSI said.