The shortage of deliveries of the biggest crude tankers and improving Chinese demand are key factors for VLCCs to join a rates super cycle in 2024, Tankers International says.
With positive signals on Opec+ production on the horizon, limited fleet growth and rising oil demand this year, a sharp uplift in rates is a matter of “when, not if”, according to Mette Frederiksen, head of research & insight at the London-based pool operator.
Tankers International operates a specialist fleet of 36 VLCCs and has a vested interest in the improvement in rates for the largest crude carriers.
In the first half of the year, it said, the VLCC market was a picture of “moderate improvement” that failed to reach the levels seen in other segments.
Time charter equivalent rates stood at $27,000 per day this week, the lowest level so far in 2024 and down from a peak of $65,000 per day in February, according to Baltic Exchange data. The same measures for smaller aframax and suezmax tankers are around $40,000 per day.
Disruption to shipping from the Houthi attacks in the Red Sea has boosted product tanker earnings but has had a limited impact on the VLCC sector. Fully laden VLCCs are not able to transit the Suez Canal.
But a probable increase in supplies from the US, Canada, Guyana and Brazil, and potential growth in Middle East production later this year are likely to boost the sector, said Frederiksen.
A rise in economic fortunes for China will boost oil imports and VLCC prospects. Chinese oil demand is expected to grow from 16.5m barrels per day last year to 17.3m bpd in 2024, according to an International Energy Agency forecast this month.
But the agency warned that China’s role as the main driver of rising imports was fading, and India and Brazil were taking a greater role in increased oil demand.
“The VLCC market has shown resilience in the first half of 2024,” Frederiksen said. “While not experiencing the dramatic boom of other segments, it has exhibited steady growth, with positive indicators for the remainder of the year.
“We remain optimistic that the VLCC segment will find its moment to enter the stage and take an active part in this year’s super cycle.”
Read more
- Trans Mountain pipeline ‘delivers’ as tanker loadings jump and rate ‘bonanza’ on horizon
- Tankers return to Texas terminal after storm Beryl swerves south
- Chinese VLCC giant braces for falling profit
- Slow VLCC market drags Hunter Group to monthly loss
- DHT Holdings jumps into VLCC time charter market in deal with Indian conglomerate
