Too Much of a Good Thing

Too Much of a Good Thing

The Strait of Hormuz has been largely blocked since late February but despite an unprecedented energy crisis, tanker ordering activity for large carriers has intensified notably this year, especially for VLCCs, the segment that is arguably the most exposed to the extended Hormuz closure. Over 120 VLCCs have been ordered this year, with this number already exceeding the highest annual VLCC order total on record. This adds to already strong investment over the previous two years, taking the VLCC orderbook from around 5% of the existing fleet in early 2024 to 35% today. This ratio is significantly higher when only mainstream vessels are considered, given that one-fifth of the VLCC fleet is already dark/sanctioned.

The Suezmax segment has also attracted significant new investment, albeit at a more measured pace than VLCCs. Over 60 tankers have been ordered for the year to date, the second highest since 2015. As with VLCCs, robust investment in Suezmaxes has also been observed in recent years, meaning that this size group has the second highest orderbook, at 30% of the total existing fleet, and much higher if dark/sanctioned ships are excluded from these calculations.

Investment in other size groups is lower in comparison to larger sizes; yet again orders for the year to date are also fairly close to total investment seen last year. The orderbook looks much healthier but this is in part a function of a healthy stream of deliveries in 2025 and so far in 2026. At present, MR orders account for 20% of the existing fleet, whilst the Aframax/LR2 orderbook stands at 18%. The Handy and LR1/Panamax orderbook is notably lower but so has been investment in these segments for the past decade (with a few exceptions during the 2023-25 period).

There are unquestionably a few solid fundamental reasons for the overall increases in new investment levels, not least the ballooning size of the dark/sanctioned fleet and a rapidly ageing fleet profile, with over 21% of the fleet over 25,000 dwt already at 20 years of age or older and another 28% in the 15 to 19 year bracket. A further driver has been the substantial premiums commanded by modern secondhand tonnage, making newbuildings a more attractive long-term investment. On the demand side, Venezuela’s reset shifted demand into mainstream tonnage overnight, and a US-Iran deal could deliver a similar shift for Iranian crude. Ownership concentration in the VLCC segment has also reached unprecedented levels, which in a tight market has shown the benefits of tactically holding tonnage back. The tanker market’s own strength has also played a role.

Yet we have been here before and the question is how much is too much? The answer will evolve over time depending on geopolitical events, the evolution of tanker trade and the pace of removal of ageing and/or dark/sanctioned vessels from trading. High earnings leave little incentive to scrap, but sooner or later that will change: either as chartering restrictions shut older ships out of trading, or as the weight of new deliveries bears down on the market. When that moment comes, demolition capacity could face a serious test given the sheer volume of ageing tonnage.

Tanker Age Profile (%)

Crude Oil

East

The AG and Red Sea VLCC market began the week on a quieter note, with tonnage availability still favouring charterers and owners looking for a pickup in visible enquiry. As the week progressed, rumours of cargoes being worked privately and increasing owner resistance suggested a shift in sentiment. Activity improved significantly during the second half of the week, with a number of vessels quietly disappearing from the list and freight gradually moving onto a firmer footing. Despite the ongoing uncertainty in the region, stronger enquiry and a tightening tonnage position helped support rates. The week ultimately closed with freight broadly stable to firmer following a sustained improvement in activity.

Geopolitical uncertainty continues to cast a shadow over the Suezmax AG market. Although enquiry remains limited, cargoes originating outside the AG have provided a degree of activity and helped maintain market engagement. Further discussions between the US and Iran remain ongoing, with participants continuing to assess the potential implications for regional sentiment and trading dynamics.

Asia Aframaxes ended the week on a more positive note, with end-decade enquiry helping to clear out the tonnage list. Owners finally gained some traction as rates recovered from recent lows, and while the improvement was modest it provided a welcome boost to sentiment, particularly with TD14 trading flat over the last two sessions, suggesting the market may have found a floor. That said, charterers remain largely in control following the sustained correction seen over the past month. The list is now relatively date-sensitive, however, and charterers are likely to continue working requirements discreetly to avoid reigniting momentum. Should another wave of enquiry emerge next week, the balance could shift quickly in owners’ favour given the tighter prompt availability. We close the week on a steadier footing, assessing Indo/Oz at 80kt × WS142.5-WS145.

West Africa

The WAF VLCC market remained relatively subdued throughout the week, although underlying fundamentals gradually strengthened. Early in the week activity remained limited and the market continued to take direction from developments across the Atlantic. While rumours persisted of business being concluded under the radar, visible fixing remained limited and a fresh market test was needed to establish clearer levels. By the end of the week the tonnage list had tightened considerably, with only a limited number of prompt vessels available. A stronger pickup in enquiry will still be required to attract additional ballasters from the East and confirm a firmer market direction.

While WAF Suezmax enquiry remained relatively drip-fed throughout the week, stronger activity from Brazil and the US helped keep position lists moving, with rates largely trading sideways. Toward the latter part of the week a handful of additional charterers entered the market, though few cargo failings made it difficult for owners to generate sufficient momentum to test higher levels.

Mediterranean

With offices returning to full capacity following Posidonia, the CPC Suezmax market had been expected to show firmer signs of activity. Enquiry remained somewhat intermittent, though a modest uptick in fixing activity was seen mid-week, with rates continuing to trade around WS215. Looking ahead, tonnage is expected to build in the region from next week onwards, which may lead to more competitive sentiment particularly on longer-haul stems, and will be something to monitor closely.

Optimism quickly turned into frustration for Med Aframax owners this week. Upon returning to full working conditions post-Posidonia, seven offers were received on the very first cargo requirement quoted. Such high competition naturally tests benchmarks downward, though the swiftness of this correction — coming so hot on the heels of a firm period — came as a shock. After repeated fixtures at WS210, rates have since tested even lower following quieter days. The psychological barrier of WS200 is now squarely in the spotlight as the week closes, with surrounding markets also correcting downward and offering no support. The West in general is providing few sparks of recovery across any of the three main Atlantic sectors.

US Gulf/Latin America

The States VLCC market started the week on a softer footing, with limited visible activity and sentiment remaining under pressure following earlier corrections. Activity gradually improved, however, as South America continued to generate a steady flow of cargoes, helping to stabilise freight levels. Brazilian activity became the key driver of the market, with prompt tonnage availability beginning to tighten as the week progressed. While overall USG activity remained relatively limited, the improving supply position provided some support to owners. The week closed with sentiment noticeably firmer than it had begun, particularly as tighter prompt availability leaves room for further upside should enquiry continue into next week.

North Sea

The North Sea Aframax market, although looking somewhat more stable compared with surrounding sectors, has not been without its struggles, with value lost here as well this week. Sub-WS150 under-the-radar activity shows that despite assistance being afforded to the region with units ballasting away, pressure from inactivity and weakening sentiment elsewhere was enough to edge negotiations further in charterers’ favour. The end result is a negative swing of around five points.

Crude Tanker Spot Rates (WS)

Clean Products

East

What felt like it was going to be a more promising week for East LRs did not exactly start on the right foot, with attacks continuing within the Middle East prolonging the collective frustration. That said, it is not all doom and gloom — there has been moderate activity, with a number of LR2s done representing a modest uptick compared with last week. Traders continue to ask questions and there is certainly an appetite for more to come, though it feels like progress will be slow and inconsistent for now.

Another difficult week for AG and Red Sea MRs, with limited cargo enquiry and a growing tonnage list continuing to weigh on sentiment. The market started quietly with very few outstanding stems and little sign of improvement, as the ongoing security situation and absence of transits through the Strait of Hormuz kept activity subdued. As the week progressed enquiry remained scarce, with EAFR levels coming under further pressure and rates ex-Sikka slipping to WS270 before repeating at WS250 mid-to-end week, while TC12 and westbound routes saw little meaningful testing. Owners faced increasing competition for the handful of available cargoes, resulting in softer levels across the board. By the end of the week only a single cargo had been publicly marketed, alongside a forward-dated Mumbai stem yet to be worked. Unless cargo volumes improve materially, the market looks set to remain under pressure in the near term.

UK Continent

An active week for MRs in most directions with some volatility, though the overriding theme is that tonnage displaced from the East is taking its toll on rates in general across the Atlantic basin. Of note is the reappearance of Russian-trading units back into non-Russian markets due to the lack of volume.

A decent amount of cargo volume has been quoted for Handies in the North this week, with XUKC levels trading around the 30 × WS220-225 mark. Cargoes have continually been quoted basis 30-37kt as charterers look to capitalise on the cheaper MR alternative, hence freight on the 30kt clips adjusting down by some five points to 30 × WS220. MR tonnage remains heavily displaced in favour of the Atlantic as the stalemate in the East continues, so it feels that Handy owners’ biggest competition at the moment is the bigger ships, with MRs continuing to pop up in that sector.

Med

The story continues for Med MRs, with the West currently tonnage-heavy and causing some headaches for owners over where best to situate vessels that have been in a holding pattern as TC14 has softened to WS250 levels. UKC, WAF and SAM runs could therefore be more appealing to some currently, and differentials are thought likely to widen as a result. Nonetheless, there seems to be a solution to most 37kt requirements, which has kept Med MR rates steady at 37 × WS145 Med-TA.

The dust settles on what has been a tale of two halves for Med Handies. Monday and Tuesday saw heightened fixing levels — potentially backlog from Posidonia — which put owners on the front foot. Heavy enquiry helped work through a long list, with rates jumping from WS175 to WS200 levels. Owners seemed to opt for the more organic approach, letting rates gradually increase in line with the positive sentiment before charterers put the brakes on. Whilst higher numbers have been seen, these have been on trickier stems, with discounted rates on elderly tonnage also thrown into the mix. The question is how resilient owners will be going forward, with potential for further gains should enquiry materialise.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

A week of corrections across both the UKC and Med, as a quiet couple of weeks take their toll. The North started the week with sluggish enquiry and multiple units ready to work at the top of the list, some with a few weeks’ idle time under their belt. Enquiry failed to surface all week before a market-quoted cargo on Thursday drew multiple offers for a run down to the Canaries at 30 × WS280, marking quite the drop in levels. In theory this should put an equivalent XUKC voyage at around the WS265-270 mark. With plenty of modern tonnage still workable at the top of the list, owners will need a fast start to the week to stem the flow quickly.

The Mediterranean has seen a similar week to the North, with the list looking rather lengthy and providing a range of options to choose from. Levels almost immediately softened at the first time of asking, with WS310 covered before a widely quoted cargo the very next day fetched WS280, before softening again to WS270 — a 40-point drop in a week, which is unusual for the usually steady DPP market here. Looking to next week, we expect a similar trend with rates continuing to soften, though we could see some resistance from owners given long waiting times for laycans and high bunker prices eating into already softening TCEs.

MR

Much like the Handies, enquiry has been slow to surface in both regions, with little to report until the end of the week. Rumours of a correction in the Mediterranean set the tone, with ideas starting the week around the 45 × WS240 mark before being adjusted down repeatedly, with the freshly tested Handy rates putting further pressure on MR owners’ ideas. Levels now sit in or around 45 × WS190-195 for an XMed run, though this is yet to be tested. Similarly in the North, the Handies made the first move, adjusting MRs down firstly to WS185 for a run to the Med before ideas continued the trend down toward the WS180 mark.

Panamax

Another quiet week for Panamaxes in Europe, with supply scarce and enquiry just as elusive to match. Rates are in need of a fresh test, but with deals concluded on a case-by-case basis we think WS150-160 could be achievable when compared to Aframaxes at WS120 for an equivalent voyage. Over in the States and Caribbean, owners have held the line, with rates remaining stable at WS210-220 for most of the week as enquiries continued to chip away at the list, leaving it relatively balanced. However, local Aframaxes have begun to soften, which could turn charterers’ attention back onto them, possibly bringing some quieter and softer sentiment to the Panamaxes — though this remains to be seen.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

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

	wk on wk change	June 11th	June 4th	Last Month*	FFA Q2
TD3C VLCC AG-China WS	-1	402	403	448	424
TD3C VLCC AG-China TCE $/day	2,000	423,500	421,500	472,500	441,000
TD20 Suezmax WAF-UKC WS	11	158	148	194	197
TD20 Suezmax WAF-UKC TCE $/day	8,250	68,750	60,500	87,500	86,000
TD25 Aframax USG-UKC WS	-54	197	252	236	311
TD25 Aframax USG-UKC TCE $/day	-19,000	43,250	62,250	54,250	79,750
TC1 LR2 AG-Japan WS	-9	502	511	547
TC1 LR2 AG-Japan TCE $/day	-1,500	143,750	145,250	156,250
TC18 MR USG-Brazil WS	4	325	321	210	386
TC18 MR USG-Brazil TCE $/day	1,750	41,000	39,250	17,250	48,750
TC5 LR1 AG-Japan WS	-16	524	541	601	525
TC5 LR1 AG-Japan TCE $/day	-2,750	107,750	110,500	124,000	104,750
TC7 MR Singapore-EC Aus WS	-10	286	296	348	321
TC7 MR Singapore-EC Aus TCE $/day	-500	30,750	31,250	39,250	35,250

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

Bunker Prices ($/tonne)

	wk on wk change	June 11th	June 4th	Last Month*
Rotterdam VLSFO	-47	667	714	750
Fujairah VLSFO	+207	1231	1,024	876
Singapore VLSFO	-30	762	792	828
Rotterdam LSMGO	-40	1084	1,124	1,205

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