French shipbroker BRS believes the reluctance of new VLCCs and suezmaxes to start trading in crude markets is harming the product tanker sector.

The Paris-headquartered shop said newbuildings continue to lift clean cargoes due to "awful" earning levels in their own markets.

"One of the characteristics of the past 18 months has been the number of newbuild large crude carriers which have transported a gasoil cargo from east to west on their maiden voyages," BRS said in its latest market report.

"This has become an attractive play for VLCC owners in the wake of exceptionally low spot hire rates," the broker added.

A non-eco, non-scrubber VLCC would have earned a nominally negative rate of -$395 per day on average in 2021 on Middle East-to-China runs.

Taking a clean cargo provides owners with the option of repositioning in the Atlantic Basin without the need to undertake a costly ballast leg, BRS explained.

Sticking with clean deals

And the broker has identified VLCCs and suezmaxes taking more than one clean cargo after those initial delivery runs from Asian shipyards, "in order to delay trading dirty for as long as possible".

BRS said: "These vessels are cannibalising LR demand which in turn is filtering down into challenging markets for smaller clean tankers."

"It also demonstrates why the VLCC segment is seen as a bellwether for the wider tanker market," the company said.

Looking forward, BRS argues that if more VLCCs decide to ballast to crude lifting zones rather than lift a clean cargo, this will reflect not only higher spot rates but also the optimism of owners that VLCC markets will improve imminently.

"Unfortunately, market information suggests that owners are still eyeing lifting clean cargoes on their newbuilds in early Q2 2022, which suggests that they expect the challenging market to persist for some time," BRS said.

An unlikely recovery story?

All in all, a swift recovery for the tanker market appears "far-fetched", the brokerage believes.

The company has identified three other key factors that could determine the timing of a recovery: scrapping levels, oil demand levels and a return to long-haul air travel.

"It will take a combination of supply and demand-side factors to turn the market around," the company said.

"If scrapping is front-loaded in 2022, it will help to shore up fleet fundamentals," the report added.

BRS argues that it could take at least until the second half of this year before crude demand approaches its pre-pandemic level.