Barry Rogliano Salles (BRS) believes owner behaviour suggests the VLCC rally might not be here to stay.

After two months of a jagged upturn, rates for the largest crude oil tankers cooled last week and BRS said some of the 16 newbuilding VLCCs set to launch later this year are looking to carry clean cargoes — a phenomenon the French broker suggested was indicative of a market not yet fully recovered.

“Unfortunately, broker information suggests that many of the owners of VLCCs due to be launched during the fourth quarter are still looking to lift clean cargoes,” it said.

“We therefore tentatively suggest that owners do not have confidence in the current rally and that it may drop back. The question is where will this new floor be?”

Overall, BRS said some owners were optimistic ahead of the typically strong fourth quarter — a confidence it does not share.

It said the cyclical strength for the last three months of the year come as refineries buy more crude to hike production.

“We tentatively suggest that the global increase in refinery runs may disappoint this year,” BRS said.

“Refiners outside of China are already running hard as they react to strong margins and transport fuel demand.

“Furthermore, considering our relatively pessimistic short-term outlook for China where we expect Covid and lockdowns to remain a going concern at least until the beginning of next year, we expect little upside in Chinese runs as Beijing appears unwilling to permit its refiners to focus on export markets.”

It further suggested that Opec+ production increases are slowing and could even be cut as US reserve releases end in October, lowering US exports.

Together, VLCC demand would remain flat while supply increases putting downward pressure on rates.

“We believe that a road to a sustainable VLCC market recovery has now started but that it will be long and paved with multiple speed bumps,” BRS said.

VLCC time charter equivalent rates hit an all-time low of -$34,845 per day on 31 May, but made upward progress to a year-to-date high of $23,677 per day on 18 August, breaking zero for the first time since early 2021 during that period.

On Monday, VLCC rates fell another $720 to $19,239 per day, according to Baltic Exchange data.