Oil Glut Looms

More and more analysts expect the oil market to move into significant surplus next year. The IEA sees oversupply of 3.3 mbd in 2026, while the EIA forecasts 1.7 mbd. Independent forecasts paint a similar picture: investment bank Macquarie expects around 3 mbd of surplus in late 2025 and early 2026, and Rystad consultancy sees 2.2 mbd next year. If these predictions are correct, crude prices could come under heavy pressure, with some saying they could fall to $50 a barrel or even lower.

The glut is driven both the supply and demand factors. OPEC+ has already finished unwinding its first round of cuts, formally worth around 2.2 mbd, though the actual production gains have been smaller. More importantly, the group has formally decided to start unwinding a second tranche of 1.65 mbd, sooner than originally planned. On top of that, non-OPEC+ supply is expected to grow by 1.4 mbd this year and by another 1 mbd in 2026, led by the Americas. Demand growth, on the other hand, remains limited, estimated by the IEA at just 740kbd kbd this year and 700kbd in 2026. Other analysts are showing somewhat stronger numbers, with Rystad and the EIA placing 2026 demand growth at roughly 1.05 mbd on average.

Despite this, oil prices have not fallen off the cliff. Benchmarks are well above Covid lows, and the futures curve is still in backwardation, which perhaps is surprising considering the oversupply is supposed to be building.

China is a big reason why. The IEA says Chinese stockpiling peaked at 0.9 mbd in Q2 2025 before easing this quarter. Stronger demand for crude has been helped by lower prices compared with last year. Some reports suggest that new storage capacity is being added, with more coming in 2026. This makes it likely China will keep building reserves into next year.

Geopolitical factors also play a significant role. Around 27% of China’s seaborne crude imports last year came from Iran, Russia, and Venezuela, producers under heavy Western sanctions. The list of restrictions announced this year is already long and looks set to grow further. The EU is now preparing its 19th sanctions package, which could target private refiners and traders handling Russian barrels. At the same time, the US has kept the threat of secondary sanctions on the table and in August raised tariffs on Indian goods by 50% in response to its continued purchases of Russian crude. With this pressure building, China has every reason to keep building its inventories.

Whilst intensifying sanctions pose a clear downside risk to Russian supply that cannot be overlooked, if the oil glut does materialise, inventories will also be built elsewhere. The US would have an opportunity to refill its Strategic Petroleum Reserve, which remains well below pre-2022 levels. Another possibility is that low crude prices and strong margins could encourage higher refining runs, putting more into product stocks first. Floating storage is another possibility, although today’s high VLCC freight rates make this less attractive.

Ultimately, however, stock building cannot last forever. If the oversupply continues and prices fall further, the imbalance will not be sustainable. Producers will eventually be forced to cut output, with negative consequences for the tanker demand.  

Oil Supply vs. Demand (mbd)

Crude Oil

East

The AG VLCC market saw minimal activity at the start of the week as we looked to close out on the first decade and turn our attention to the second. Charterers had adopted a cautious approach in a bid to try and reduce upward pressure on rates and as the week progressed, enquiry levels began to improve mainly for the 2nd decade period and activity was sufficient to give a boost to the market pushing freight levels back up to around the WS100 level. Although enquiry levels had picked up there was enough tonnage willing to fix around last done levels and lock in decent TCEs. Steady has been the call on sentiment for majority of this week and looking ahead to next week the hope will be to see a busy couple of days prior to golden week beginning. Today we are calling TD3C WS100 and AG/West WS58.

The Middle East has been steady on Suezmaxes this week with a very stable 140 x WS65 via C/C being repeated. There is still tonnage keen for this run, and we don’t expect a great deal of change, though low levels of enquiry could tempt charterers into pressing for a touch less. Rates going East have softened this week, and it’s expected that Charterers will be aiming below 130 x WS137.5 today.

West Africa

The WAF VLCC market registered a subdued week following the busier spell last week. Enquiry was limited, with only fixing under the radar taking place, leaving rates largely unchanged and sentiment steady. While the tonnage list for natural dates appeared relatively tight, muted activity allowed charterers to secure ships without unsettling the market. Attention now turns to next week, as charterers begin working end-October stems, the list currently looks balanced, although clarity on the impact of the recent typhoon in the East is still awaited. Today we are calling WAF/East in the region of WS92.

The WAF Suezmax market has been plagued by a lack of fresh enquiry, and a building list of prompt tonnage has caused rates to drop to 130 x WS107.5. With prompt vessels still available, it seems possible we may even see rates chipped away at even further next week. The premium to head east is around 10 points today, but with a softer AG market, we may see some ballasters to put some pressure on this.

Mediterranean

TD6 for Suezmaxes in the Med remains very stable and unexciting at 135 x WS142.5 pressure on rates in West Africa may translate into this figure being chipped away at next week. Libya/Ningbo remains untested for quite a long time now; we estimate rates today to be approximately $5.2M. 

Another week of more of the same for Med Aframax owners as they hunker down and enjoy the fruits of a profitable summer at current levels. Surrounding markets wax and wane but in not significant enough degrees to change the temperature of the Med or indeed tempt any more ballasters away from the region than would normally be the case. As such enquiry levels were enough to maintain rates in the low WS140s for Ceyhan runs and low 150s for shorter Libya flats. CPC cargoes found a market at WS160 in their usual low supply. As we approach the weekend yet more of the same is expected next week unless the States market really begins to find its feet.

US Gulf/Latin America

The Americas VLCC market saw limited activity this week, with charterers largely dictating the pace to ease pressure following the recent highs. Levels have now edged back down past the $12m level and sentiment has been left under pressure. Meanwhile, Brazil export market also faced a quiet week with little to report on the VLCCs. One market cargo was worked and collected a strong amount of offers which led to the eventual easing of freight rates. Today we are calling USG/East $11.25m & Brazil/East WS90. 

North Sea

The North Sea market remained delicately poised this week with one or two of the more local owners as usual dominating the sentiment and direction. The States market recovered as the week drew on and charterers fearing the exodus of ballasters took to booking several ships off radar. WS130 was achieved in the main but by the close a small increase of 5 points was achieved by one of the local owners, who whilst not tempted to ballast away could see that many had been, and thus, with a thinner last was able to capitalise. Expect the same again next week.

Crude Tanker Spot Rates (WS)

Clean Products

East

LR2s came under heavy pressure this week, with TC1 fixed four times on subs at WS110. Concerns over reduced October volumes materialized, while westbound enquiry stayed limited. Following TC1 on subs at WS110, KPC put two ships on subs ex Kuwait at $3.2m, and westbound levels quickly gave way. With weak returns and limited backhaul opportunities, owners increasingly opted to remain east and absorb waiting time rather than commit west. As the week came to an end, LR2s reached their bottom. Private deals emerged, the LR2s showed signs of strength, with reports of TC1 on subs WS115 and westbound $3.35m. LR1s had long resisted LR2 pressure, but eastbound softened with TC5 slipping below WS130, and a Singapore/Japan fixture concluded at WS125. Westbound remains resilient at $2.85m, though sustaining this level may prove difficult given the narrow spread to LR2s. Conclusion: LR2s have bottomed and showing signs of recovery, while LR1s still face some potential downside.

A much more active week for the MR’s here in the AG which was needed after a few weeks of sluggish activity. Rates had been at an annual low across all runs but after an influx of early October stems levels have moved up a touch. 35 x WS175 is the call for TC17 with other routes steady. Heading into the weekend a few stems remain outstanding but with tonnage still needing to be cleared we don’t expect any substantial gains this side of the weekend.

UK Continent

With a flurry of fresh enquiry towards the end of the week MR owners are buoyed that rates may lift a little into next week. Rates have crept up marginally this week due to ongoing tonnage displacement away from the UKC and Med regions and also due to late running ships caused by poor weather conditions and general port delays. The TC2/TC14 combination voyage is still the one owners are keen on so usual differentials are in place for WAF and Brazil. The short haul has also been busy on the MRs as well for those looking short, or to clean up cargo history or update sires. So, the general theme is that most routes are working and if we see some more refinery capacity come online into October it will likely push rates up steadily. 

An active week, but unfortunately for Handy owners the MRs keep on invading the space and where there is tightness this is relieved by oil going on the larger ships. There has been enough activity to keep rates fairly strong, and the usual differential is back in play for the Med as this has now become an attractive round-trip voyage again. We don’t expect a wild change in rates but as the seasonal distillate volumes start to change and the weather deteriorates, we would expect rates to tick up modestly. 

Med 

After some positive pressure generated by an uptick in enquiry on MRs and a tight front end earlier in the week, we now sit at 37 x WS120 Med-TA. Activity has continued throughout with the help of a busy North market. There have been a handful of varying rates due to load port and grade dependent stems as well as some under the radar dealings which have helped fuel positive sentiment. Additionally, as with the Handies, we see more tonnage in the East-Med, thus, any West-Med loads have had the potential to yield more if not repeated last done. Owners will continue to feel somewhat positive going into the weekend despite a modest correction and the week closing 15 points less than where we opened.

Handy owners have spent the week in the driver’s seat regarding Med Handy rates as charterers failed to keep a lid on rates. Demand outweighing supply is the root cause of why this market has firmed. Owners remain ambitious going into the weekend where rates will seemingly hold at 30 x WS180. The key factor to look for on Monday will be whether there is enough enquiry to hold rates steady post weekend restock. Already we have seen firmer itineraries on several ships which would traditionally hint at some potential downward pressure.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

It’s been a somewhat active week in the UKC as WS220 repeats before rate ideas begin to firm up. The week began with multiple relets on the list and ready to work before gradually slipping into programme trimming the list but leaving traditional owners without the chance to test the market up. The list is now tight, and we expect to see levels firm towards the WS225 mark early into next week, but enquiry will need to surface quickly.

The Med has seen active week against the backdrop of a shorter list on Monday morning. Relets went into programme quickly and enquiry surfaced early trimming the list further. Levels soon firmed from WS185 on Monday to WS187.5 by mid-week and WS190 by week’s end. We expect to see this rebound continue with WS190+ on the mind of owners early next week.

MR

MR enquiry has been just as scarce as availability with little to report here. Units still look scarce early into next week. We feel freight here should be around WS160-165 mark. In the Med we have seen little by way of activity with WS135 fixed on Monday marking the low point before tonnage saw part cargo opportunities which helped to trim up availability. We expect to see next done rates around the WS150 mark.

Panamax

A quiet week for Panamaxes both in the UKC/Med and in the USG/Caribs. Over in Europe Panamaxes have found employment via Handy stems for the most part showing just how elusive backhauls back to the USG have been lately. A flat feel with rates around WS115 UKC-USG for now. TD21 has been equally quiet as Aframaxes have been the flavour of the week for charterers. Under-the-radar fixing as kept tonnage build up at bay but levels trend down towards WS145 for now.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)

wk on wk changeSep 25thSep 18thLast Month*FFA Q3
TD3C VLCC AG-China WS-51011057065
TD3C VLCC AG-China TCE $/day-6,00094,500100,50055,50045,500
TD20 Suezmax WAF-UKC WS-5111116108101
TD20 Suezmax WAF-UKC TCE $/day-3,50047,50051,00045,75038,250
TD25 Aframax USG-UKC WS4165161164151
TD25 Aframax USG-UKC TCE $/day1,50041,00039,50040,50031,750
TC1 LR2 AG-Japan WS-7112119157 
TC1 LR2 AG-Japan TCE $/day-2,50023,50026,00038,750
TC18 MR USG-Brazil WS26219193216210
TC18 MR USG-Brazil TCE $/day4,75029,25024,50028,75025,500
TC5 LR1 AG-Japan WS-19127146158152
TC5 LR1 AG-Japan TCE $/day-5,25019,00024,25026,50023,500
TC7 MR Singapore-EC Aus WS-4198201213200
TC7 MR Singapore-EC Aus TCE $/day-75023,00023,75025,50022,500

(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis

Bunker Prices ($/tonne)

wk on wk changeSep 25thSep 18thLast Month*
Rotterdam VLSFO  -6455461452
Fujairah VLSFO  -2482484484
Singapore VLSFO  +6486480490
Rotterdam LSMGO  +35686651658

Print the report