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Mette Frederiksen

The Year of the Rabbit brings good tidings for VLCC market

China is a key driver of the VLCC market. The sheer scale of the country’s need for oil and an infrastructure system built to accommodate large crude oil tankers means that shipping crude oil in the largest possible parcel sizes ensures economies of scale and a more cost-efficient transportation solution.

On the flip side, this also means that when the Chinese economy and the country’s demand for oil reduces, we see an immediate effect in the VLCC market. This demand slowdown was, in effect, what happened during the first half of 2022. While the smaller tanker segments benefitted from freight market shocks early in the year on the back of the conflict between Russia and Ukraine, in fact, the conflict did not directly impact the VLCC segment as this large vessel group rarely is involved in loading Russian oil.

In the early months of 2022 the VLCC market was significantly impacted by declining oil demand in China. The country was struggling with a resurgence in Covid-19 infections that caused new lockdowns and more travel restrictions. In addition, a slowdown in manufacturing activity caused industrial production decline, which reduced oil demand even further.

As a result of demand slowing and lockdowns impacting its industry, throughput in Chinese refineries collapsed to two-year lows as state-owned and integrated independent refineries ran at nearly 75% of capacity in April, while some private plants operated at just 50%, according to Platts. Intelligence from data provider Kpler shows that the reduction in refinery throughput boosted inventories in China which remained elevated through May, June and July before declining into the autumn.

This decline in refinery activity and resulting inventory build-up slowed down the country’s crude oil imports. At the same time, the price of oil was rising which did nothing to encourage more buying. As a result, we saw Chinese demand for VLCC tonnage decline. While we counted 107 monthly liftings destined for China in 2021 and a similar count in the first four months of 2022, this number dropped to an average of just 95 liftings in May, June and July.

In late summer, China began to re-emerge from its Covid restrictions. Increased industrial activity and greater freedom of movement both added to a demand surge in the second half of the year. This growth was further supported by new product export quotas that required refiners to demand increased volumes of crude oil. With oil demand improving and refinery runs increasing, we noted a significant impact on VLCC cargoes booked for discharge in China. In fact, we counted as many as 132 liftings in October, with an average of 125 monthly liftings in the final quarter of the year.

Looking back at historical data, we find an almost perfect correlation between both Chinese oil demand and VLCC liftings and refinery runs and VLCC liftings. It is, therefore, reasonable to expect this trend to continue. We can look at projections for oil demand and refinery runs in China to understand what we may expect going forward regarding VLCC activity bound for the country.

The latest estimates for China’s oil demand in 2023 peg growth levels at close to 6% on the back of the continued easing of Covid measures and economic recovery. We have seen a recent surge in infection rates in China and a temporary decline in demand. Yet, expectations are that this will be managed, and that demand will resume its growth trajectory from the second quarter. Likewise, China’s crude runs will initially be affected by the weaker demand picture, but this is also expected to reverse. We are therefore optimistic that China will continue to provide strong support to the VLCC market throughout the year.

We already count 120 global VLCC liftings destined for China in January and February, with approximately 60% emanating from the Arabian Gulf and the remaining from the Atlantic basin. While it is difficult to predict the exact number of liftings we will see in the VLCC space, the correlation theory indicates we can expect numbers to rise by around 5 cargoes per month compared to 2022 actuals. The great benefit to the VLCC market will come from the continuous pull of crude from the Atlantic basin, which comes with extra long tonne miles.

As one of the key drivers of the VLCC market, we continue to closely monitor China and the country’s energy data. The current outlook is positive with an economy in recovery mode, rising oil demand and a refining industry that is forecast to remain strong. The current crude trade flow mix into the country already supports a healthy VLCC market, and we look forward to a year of continuous growth from the economic powerhouse that is China.

Tankers International launches a new CII feature for popular VLCC fixture app

Updated app will provide indicative CII rating and score for every voyage fixed based on Tankers International’s world-leading VLCC market data.

London, 6th February 2023 – Tankers International, the world’s leading shipping pool for VLCCs, today announced the launch of a new CII feature for its popular VLCC fixture app, which uses Tankers International’s comprehensive market data to calculate indicative voyage CII scores for all market fixtures.

The new CII reporting mechanism uses Tankers International’s extensive knowledge of the global VLCC fleet to benchmark any vessel’s bunker consumption against the closest similar vessel out of the 250 vessels that have traded in the Tankers International pool since 2000. This is set against a benchmark speed, which adapts based on Tankers International’s own data on averages across the sector and market conditions.

Carbon Intensity Indicator (CII) regulations came into effect at the start of January 2023, and represent an ongoing annual measure of the carbon intensity of a ship’s operations in terms of its greenhouse gas emissions relative to the amount of cargo carried and the distance travelled.

The Tankers International VLCC fixture app’s new CII functionality gives shipowners, charterers, and brokers insight into where a vessel or voyage is ranked on the CII scale, helping to make strategic chartering or operational decisions.

The app’s data will show a precise analysis and a breakdown of how a voyage CII score is calculated, so a shipowner will know how their voyage is ranked and where they may need to improve. In addition, if a voyage incurred a long idle period, the app will provide two clearly labelled and accurate CII estimates to account for this. Calculations are listed in full for PLUS and PRO users.

The Tankers International VLCC fixture app was first launched in 2014 and is the only publicly available source of fixture data for the global VLCC fleet. The app was re-launched in December 2021, and the new CII feature will allow users to integrate even more quality data and analysis into negotiations and strategic decision making. This added insight and market transparency will benefit the entire VLCC sector.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “Many people are still uncertain about how to keep up with shipping’s latest regulation, and we recognise the importance and need for quality data, faster to support decision making for shipowners, charterers and brokers. We foresee CII ratings impacting commercial decisions across the sector this year, and providing access to this voyage specific CII information will support key market stakeholders – helping them adhere to decarbonisation regulations and recognise market trends more quickly.”

The Tankers International VLCC fixture app can be accessed directly from any web browser as an ‘in-browser’ app here.

2022 in review: the year of the VLCC market recovery

Now that we have closed the books on 2022, we are looking back at a year of ups and downs. The year began with high expectations of a long-awaited VLCC market recovery, and although the recovery was slow to kick off in the VLCC space, the year ended on a high. 2022 also brought added complexity to VLCC trading strategies, as a result of changing trade patterns and new regulatory requirements around the Carbon Intensity Indicator reporting.

We used our detailed VLCC fixture database to digest last year’s events and analyse how they helped to reignite the freight market for the largest tanker segment.

Join us as we review our internal cargo count dashboard.


First, we need to look at absolute growth in VLCC cargo numbers. Counting cargoes fixed in the spot market, we noted an average increase of 41 liftings per month in 2022 compared to the previous year – this represents a growth level of 19%! To provide greater context, this compares to an annual growth rate of circa 4% across the last 10 years, before the pandemic impacted the market. We saw a huge drop in oil movements during 2020 as Covid restrictions kept global mobility and productivity at a minimum. While we experienced some recovery in 2021, it was not until 2022 that the world truly began practicing “living with Covid”, and the effects of this are now mirrored in oil demand and thus tanker markets.  The year’s significant rise in VLCC cargo numbers resulted in a higher demand for VLCCs, as measured by days employed, which increased by 7%. This is in line with the 10-year average, excluding the two years impacted by Covid.

If we consider the various trade routes and how they have changed through the year, it becomes evident that significant growth was driven by the Arabian Gulf (AG) market. This load region saw an additional 35 monthly liftings across the year. This development runs parallel to the OPEC+ commitment to gradually add oil supply back to the market throughout the year. Following the announcement that the alliance would cease gradual additions, we noted a slight drop in cargo numbers from 186 monthly liftings in 3Q-2022 to 174 monthly liftings in the fourth quarter. This level of activity remains much higher than pre-Covid cargo counts of 160 in the fourth quarter of 2019, and it provides a solid baseline of activity for the VLCC market.

The second largest trade route in the VLCC market is West to East. This route encompasses all of the load regions in the Atlantic basin, excluding West Africa. Our fixture data indicates a monthly average of 38 liftings on this route – a slight decline from the previous year. This relatively low average, however, is marred by very low activity in the second quarter when we counted just 32 liftings per month. The driving force behind this was mainly at the receiving end, as China experienced a period of significantly reduced crude purchases.

Contrary to most other countries, China continued its zero-Covid policy through much of 2022 and lockdowns remained in place for longer than the rest of the world. China began to emerge from these restrictions over the summer months, and in combination with new product export quotas, the market saw renewed crude demand from Chinese refiners. This was the real catalyst for the buoyant VLCC market we have today. Not only did Chinese crude demand return, but China was sourcing much of the incremental barrels from the Atlantic basin. Tankers international recorded 46 liftings on the West to East trade lane each month in September, October and November.

The corresponding change in vessel demand on the West to East route indicates an overall decline. This is due to a more efficiently traded VLCC fleet, as more AG to West volumes emerged. VLCC owners were able to increasingly triangulate their trading between the AG, Europe and the Far East, reducing their overall ballast leg and, consequently the time that vessels are employed on the West to East route. The increase in vessel demand on the AG/West routes makes up for most of the decline on the West to East route.

Another game changer in 2022 was the resurgence of inter-Atlantic trading on VLCCs. On our dashboard these trades are listed as “West/West”. Europe has been pulling crude oil from new suppliers in the US, Brazil and West Africa, and on some of these routes, it became more economical to employ tankers from the largest segment. Since May, we count an average of 11 monthly liftings on these routes. The pull of VLCCs into Europe both from the Atlantic basin and the AG has given shipowners the ability to become more creative in the trading of their vessels, devising increasingly complex strategies to maximise the utilisation of their assets. This has been a welcome development!

Although the VLCC market was slower to recover than the Suezmax and Aframax markets and remained lacklustre through most of the first half, it has since returned with full force. It has been encouraging to see the market quickly adapting to added trading complexities and changing trade flows. We will continue to count cargoes and analyse any changes to trade flows through 2023. While we may not see the same uptick in absolute fixture numbers this year, tonne miles are set to continue on an upward trend with more oil moving long-haul. Given that development, we will see demand growth in the VLCC segment remain robust.

Tankers International adds to VLCC Pool off the back of a buoyant end to 2022

Pool growth continues as complex market conditions highlight the value of pooling.

Tankers International, the world’s leading shipping pool for VLCCs, has grown rapidly throughout 2022, bringing the total size of the Tankers International fleet to 66 VLCCs, across 8 pool partners.

The Tankers International pool has added more modern tonnage throughout 2022, bringing the average age of the fleet down whilst increasing its size. Tankers International’s 66 strong fleet now has an average age of 7.8 years. The specialist scrubber pool has grown to 34 vessels from 19 vessels at the start of 2022 with an average age of 6.8 years decreasing from 7.5 years.

Tankers International pool partners benefit from improved cash flow, allowing the vessels to trade on longer, more profitable routes, alongside streamlined operations and the strong market intelligence of Tankers International. The unique pooling model leverages the collective strength of the pool, in data, scale, and size, to maximise earnings for pool partners.

Tankers International’s Scrubber Pool operates as a sub-pool, sitting within the Tankers International umbrella of specialised Pools. This means that it operates from a robust financial and commercial perspective whilst continuing to share resources across the entire Tankers International fleet.

Charlie Grey, Chief Operating Officer, Tankers International, commented: “The VLCC sector’s recovery has been dramatic, especially during the second half of last year. However, this recovery has arrived alongside changes in trade routes as our market becomes more complex. As a result, we have seen the value of pooling continue to increase. We are incredibly pleased that the Tankers International VLCC pooling model continues to provide exceptional value for our partners.”

Editorial – How pooling can help tanker owners tackle decarbonisation

Editorial published in Riviera Maritime on 19 December 2022

Tankers International senior vice president commercial and operations Matthew Smith explains that if charterers pick by CII rating, owners need access to resources to reach the required level, which ultimately is good for the environment, too.

IMO’s Carbon Intensity Indicator (CII) provides an easily comparable, benchmarked environmental indicator for charterers as they focus on shipping’s role in their scope 3 emissions.

At the same time, emissions have become an increasingly important factor for charterers and cargo owners and could create a real premium for green tankers – which can, on top-line performance at least, now be easily signposted by CII scores.

Yet there is no clear path to ongoing performance improvement for shipowners.

There is a bewildering array of operational, digital and hardware offerings on the market, with little solid evidence of their benefits. Often, shipowners have little time and few resources to investigate them anyway.

Most new fuels and efficiency technology are relatively new to the market. Often these options come with technical and commercial risks that a shipowner has to understand before choosing which direction to take. At the same time, some will face operational issues masked by the fact they are still new to the market. Given the costs associated with installing new systems on board a vessel – and the costs associated with an issue – can be astronomical, charterers and regulators are often asking shipowners to take huge commercial risks.

Charterer demand represents an enticing reward for decarbonisation but cannot justify owners’ decisions that have not been properly evaluated against their vessels and operational profile. The vast majority of tanker owners do not have enough flexible operational resources to do these complex assessments and may have to build out new teams.

Pooling can free up a shipowner’s operational resources, allowing them to redeploy staff to tackle these assessments and to organise any retrofits they result in. This can allow a shipowner the flexibility to tackle challenges like decarbonisation without waiting for new staff or bringing in external consultants.

A pool participant can also benefit from enhanced technical support and information sharing that can help them to understand and mitigate operational issues with decarbonisation technologies. At Tankers International, we organise technical forums among our pool participants to facilitate this open information sharing.

Cash flow is another pivotal challenge for tanker owners seeking to decarbonise their fleets. Inconsistent earnings in the spot market can make it difficult for owners to plan technical retrofits profitably, with drydocks often coinciding with particular cash flow droughts. Pooling combats this challenge by providing shipowners with a regular income that is paid at scheduled intervals through revenue sharing between a pool of vessels.

Yet even the most ambitious tanker owners will take time to decarbonise. Some charterers and cargo owners do not have that time and face added scrutiny from the public, investors, and regulators to cut their supply chain emissions now. These charterers and cargo owners need innovative options available today.

The Tankers International’s Climate Compensation Voyage Programme was recently launched in partnership with specialists Vertree to provide these options. The scheme uses scientifically recognised methodologies and proprietary data to calculate a specific VLCC’s emissions on a voyage on a monthly or annual basis. Charterers can compensate for their carbon emissions via a range of nature-based and community-led solutions.

Shipping is changing, and tankers will decarbonise. This transition will take time, and will not happen overnight, but it requires careful planning and evaluation work from every shipowner to start today. Shipowners must use all the tools available to help them through the monumental challenges ahead – including pooling.


By Matthew Smith, VP Commercial & Operations, Tankers International

The thrill of Brazil – how record-breaking exports from the South American giant are boosting the VLCC market

Brazil Exports Tankers International November 2022

As the VLCC market goes from strength to strength, we’re exploring some of the factors that are driving this trend.

Oil demand across the world remains robust and is closing in on pre-Covid levels. At the same time, production levels are improving, and while OPEC and its allies have recently announced a small reduction in their quotas, alternative producers are posting record high production and exports that are resulting in fairly balanced oil markets. Brazil is one of those producers.

Firstly, on the demand side, a fresh round of product export quotas has recently been released by the Chinese government. This, combined with fewer Covid-related restrictions, has sent the country’s demand for crude surging. Refineries are taking in more crude to utilise the new export quotas and VLCC shipments into China have increased as a result.

The strong recovery in VLCC rates towards the Far East in the past month is driven both by this increase in Chinese demand but also by where in the world China is sourcing its crude supplies. Oil price spreads have supported the buying of Atlantic Basin crudes over Middle Eastern crudes, and we have seen a significant increase in West to East movements in the VLCC segment over the past couple of months. Many analysts talk about the US Gulf and how the release of Strategic Reserve barrels has driven the VLCC market, and this is not untrue. However, in addition to this, we have seen a great support from Brazil.

Crude exports from Brazil have risen to new highs amid the strong flows to China, and China remains the biggest buyer of Brazilian seaborne crude. During the months of September and October, data from Kpler indicates that oil tankers loaded 1.7 million barrels per day of crude in Brazil – an increase of 23% compared to the average exports during the first eight months of 2022. Flows to China comprise about 30% of the barrels exported via ship.

Translating this development into VLCC demand presents an equally impressive increase. In October, our Tankers International proprietary data counted a record 19 VLCCs loading in Brazil. This is a huge jump from a monthly tally of 10 VLCC loadings from January to August. With two thirds of these VLCC shipments destined for China, this drives a drastic increase in tonne mile demand for the segment. An average round voyage from Brazil to China takes 100 days to perform, employing a VLCC for significantly longer than the same cargo from the Middle East to China, which takes around 60 days on a round voyage basis (from load to discharge and back to the load region.)  So far in November, we count 15 VLCCs booked to load crude in Brazil and the month has only just started.

As oil supplies are tightening in other parts of the world, this increase in Brazilian output and exports is a key driver of the currently buoyant VLCC market.

Accessible Data Means Better Decisions

The best commercial decisions are built on good data. Today, more than ever, comprehensive information holds huge power and potential.


The VLCC segment has historically been incredibly opaque. Critical information on fixtures has been held by a select few and not shared with the wider shipowner, charterer, broker, and investor communities. This power imbalance meant that many were making business-critical decisions ‘in the dark’, and addressing the disadvantage that this caused to the market as a whole was one of the driving forces behind the initial development of our VLCC Fixture app.

The ‘live’ fixture data we share via our app can make the difference between maximising profits and missing an opportunity on an individual level. Yet, it can have an even more substantial impact at an institutional level – when it can be integrated into existing systems to supplement other data streams, and seamlessly provide greater levels of support from strategy development to individual deal making.

The right data

If you know at what rate a VLCC was fixed at some point this week, you have some insight into market movements. If you know what are a VLCC was fixed at on the same route that you are contracting for, 5 minutes ago, you have a superior level of insight.

When you can cross-check vessel and contract specifications against your own, you can understand the exact market value of one ship on one route when you are making a deal. By accessing a comprehensive breakdown of that vessel’s Time Charter Equivalent (TCE), you can understand how earnings translate to profits across the market – and where you may need to make adjustments.

Coupling this data with detailed cargo forecasts can further allow decision makers to plan ahead, from strategic decisions on asset plays or dry dock dates, to commercial decisions by charterers and cargo owners guided by VLCC availability and freight levels globally or in specific regions of the World.

This is not an exhaustive list of useful data points by any means, but it does illustrate where the quality of the information you hold feeds into practical, on-the-ground decision making. Decision makers need to have fresh, comprehensive, relevant data that they can trust if they are to maximise their earnings.

An institutional approach to data

Where fixture data is vitally important, it is rarely the only decision-critical information that an organisation will hold. Most shipowners and charterers will hold their own proprietary information or data streams, and many will purchase external data dashboards and terminals from specialist insight partners.

Maximising the institutional value of this data can be a difficult task. The biggest challenge is often ensuring that decision makers are practically able to access, understand, and cross-check different types of data that they have access to at critical times; often data streams provide different types of information in different formats, and switching between dashboards or raw number can be challenging.

Information must be readily accessible and frequently used across each of an organisation’s levels if it is to be used to its full potential. The best way of achieving this is to integrate data streams into a single system, to create cross-stream dashboards and uniform data formatting.

This can be critical for larger shipowners, charterers, and investors. But it is also vital for their external insight providers, who pride themselves on offering an easy-to-navigate one stop shop for high quality data and insights.

We know that this knowledge and insight-based approach works because we use it across Tankers International. By leveraging the strength and scale of our pool, alongside the unrivalled experience and expertise of our team, we can develop enhanced and actionable insights. We then use these insights to reliably boost earnings for all our pool partners.

We provide our VLCC fixture data in an easily accessible format. All users benefit from a simple user interface that can be accessed via a simple web app. PLUS tier subscribers additionally benefit from enhanced search features that allow them to better locate specific data based on different parameters such as vessel type, owner and route, as well as having access to a comprehensive breakdown of TCE calculations. PRO tier subscribers also benefit from cargo forecasts and live WhatsApp notifications.

Our data can also be integrated into a company’s own systems through our app Application Programming Interface (API). A number of major organisations have already opted for this API integration option. If this is of interest to you or your organisation, please contact the Tankers International team.

Data insights are the foundation of all good commercial decisions. Now more than ever, shipowners, charterers, brokers, and investors must ensure that they have the right data – and are able to seamlessly use it, throughout their organisation.

You can find more information about subscriptions for the Tankers International VLCC Fixture app here. Please contact our team to enquire about our API.

Editorial – Capitalising on the Middle East’s VLCC Recovery

Editorial published in Transport & Logistics Middle East on 7 October 2022

It was widely predicted that we would finally see the VLCC market recover this year. After two years marred by challenging oil demand and Covid restrictions, this year seemed to promise a return to ‘normal’ as restrictions were lifted, and OPEC committed to continuous supply increases.

Happily, as we enter the latter stages of 2022, we can say that VLCC demand is well on the way to recovery. Rates have risen exponentially in recent months, in contrast to the historic lows at the start of the year. Interestingly, these headline figures have masked another story; VLCC trade routes are changing.

A geographic shift

Oil demand and production increased dramatically during the first half of 2022. This was primarily driven by the easing of Covid-19 restrictions that had artificially depressed global demand since late 2019, alongside the impact of the Ukraine invasion, which has affected energy security.

Tankers International proprietary data shows that this has created a definite global increase in VLCC fixtures on the spot market. We saw an additional 27 monthly VLCC spot market liftings during the first half of this year globally, when compared to the 2021 average. This leaves the sector very close to matching pre-Covid average fixing volumes.

Yet, this recovery has not been uniform. The Arabian Gulf has seen the fastest recovery in volumes to date. This is unsurprising, given that many OPEC members in the region initially cut oil supply levels in response to Covid-related decreases in demand and are now increasing production at a steady pace.

The number of VLCC fixtures in the Middle East has increased steadily over the last two to three years and has now surpassed pre-Covid levels (2019 averaged 156 liftings per month). In the Arabian Gulf alone, we counted an additional 26 liftings per month in the first half of this year compared to last. We note further expansions going into the third quarter and count 189 VLCC liftings in the Arabian Gulf in September this year.

While Europe has not historically been a major receiver of crude oil in VLCC parcel sizes, this year we have seen a marked shift. As the continent has reduced the amount of Russian oil taken in the wake of the country’s conflict with Ukraine, we have seen a dramatic increase in demand from alternative suppliers, such as the Middle East but also the US and South America. Much of this volume has moved on VLCCs as freight levels in the segment have been competitive compared to the smaller tanker types, that have traditionally carried crude oil to Europe.

Traditional VLCC receivers east of Suez have also seen increased volumes, including India and Singapore. During the first half of the year we noted a reduction in VLCC cargoes heading to China, this trend has however reversed and September saw a surge in activity into the country. This latest demand surge is driven by a declining oil price and move away from sanctioned Russian oil.

Staying ahead of a moving market

Where this rate of change is unusual, it is not completely unsurprising. Tanker markets have always moved quickly and will continue to do so well after the global economy has moved forward from the consequences of Covid-19 and recent geopolitical issues.

The past few years have proven that not all paradigm-shifting events are reasonably foreseeable. Yet, detailed analysis is still critical in navigating the VLCC market – ultimately, profits are driven by understanding how fundamentals are evolving and likely to evolve in the medium to long term and understanding the exact market conditions as you negotiate a fixture.

It can be easy to miss out on potentially lucrative market movements if you do not have the data to create strategy and informed decisions. Negotiating positions may leave the other side in a particularly advantageous position, or longer-term decisions – such as on time charters or dry docks – could leave you missing out on headline rates.

Harnessing this data is one of our core values at Tankers International. By leveraging the strength and unique scale of our VLCC pool, we can secure data and information that would otherwise not be available to any of our pool participants – which we turn into actionable insights, that help maximise earnings.

This approach was the motivator behind the development of our VLCC Fixture app, which we believe is creating a healthier market by opening information on fixtures up to the wider shipowning, chartering, broking, cargo owning, and investing community. Subscribers benefit from segmented and searchable information on fixtures updated every 5 minutes that was previously the preserve of a select few. This includes TCE breakdowns and cargo forecasts – which can allow users to reliably take advantage of an evolving market.

Oil logistics is now facing unchartered territory, especially in the Middle East. Capitalising on today’s market requires tools to succeed – such as the weight of a tanker pool, ideally combined with a robust set of data to enable informed decisions.

By Charlie Grey, Chief Operating Officer (COO), Tankers International

The VLCC market renaissance: Strengthening fundamentals are driving 2022’s long-promised VLCC recovery

The year 2022 was from the outset seen by many as the year we would finally see the VLCC market recover. After two years marred by Covid restrictions and challenging oil demand, this year started with greater freedom of movement for people across the world and OPEC committing to continuous oil supply increases. As the summer draws to an end, we have a clearer picture of how these changes have directly impacted the VLCC market through the first half of this year.

Looking at our proprietary data, we can compare the average monthly VLCC lifting numbers in the spot market for 2021 and the first half of this year. As oil demand and production have been rising throughout that period, we expect an increase in demand for VLCC tonnage and therefore, an increase in cargo counts in the segment. The data shows a definite boost. Globally we count an additional 27 monthly liftings in the VLCC spot market in the first half of this year compared to the 2021 annual average, and we are very close to reaching pre-Covid fixing volumes.

It is interesting to look at where these changes have occurred in more granularity. Unsurprisingly, the load area with the highest increase in volume has been the Arabian Gulf (AG). Many of the OPEC members that initially responded to the Covid-induced collapse in oil demand by cutting supplies are based in this region. This is also the region now returning oil supplies to the market at a steady pace. We count an additional 26 liftings per month from the Arabian Gulf alone this year. The data also shows a slight increase in volumes loading in the US Gulf with an additional four liftings per month. Much of this has been replacement barrels for Russian oil and has found a home in Europe, a route traditionally covered by smaller tanker segments when traded in lesser volumes. Simultaneously, we see a reduction in cargoes lifted from Europe over the period, as the region has kept supplies internal.

At the same time, Europe is topping the chart of increases in cargo volumes received into an area. This is off the back of a reduction in Russian oil taken following the country’s conflict with Ukraine. Traditionally Europe has not been a big receiver of crude oil in VLCC parcel sizes. However, this year has seen firstly a rise in oil imports into Europe and secondly a freight market that made the VLCC segment competitive relative to the suezmax freight market. We have also seen increased volumes into India, Singapore and other traditional receivers east of Suez. While China remains a significant taker of VLCC cargoes, the data shows an average of 5 cargoes per month fewer this year compared to 2021. This is down to them receiving more crude from Russia via pipeline and smaller tankers and due the country drawing down on inventories during a time of elevated oil prices.

It has been an interesting first half of 2022 in the VLCC market. Our previous blog discussed the change in crude flows into Europe, titled, “Atlantic crude flows drive change in VLCC tradelanes”, however, a positive takeaway from this piece, is that overall cargo counts are up, and not by an insignificant amount. 27 additional cargoes per month would employ more than 30 VLCCs full time if they were all traded between the AG and Singapore. Of course, some travel shorter distances and some travel further, but it is an indication that the market has seen the positive shift we expected at the start of the year, at least in terms of fundamentals. We need this to translate into a more dynamic freight market where tighter fundamentals dictate a sustained uplift in the freight market and a more profitable freight environment for shipowners.

Will Zero VLCC Contracting Lead to Fleet Contraction?

For the past 12 months, we have seen zero new orders for VLCC newbuildings. This has left the orderbook at historically low levels and market fundamentals are pointing to several years of record low fleet growth – or even fleet contraction.

The last recorded order for new VLCC tonnage in the Tankers International Database is dated June 2021. This is more than 12 months ago and this is the result of depressed freight markets combined with booming returns in competing shipping segments. While tanker owners have been struggling with marginal profits since Covid-19 devastated the global demand for oil, shipowners in other segments have experienced golden years, earning healthy returns and leaving them with an appetite for contracting more tonnage. Shipyards have been quick to reach capacity building vessels such as bulk carriers and container ships, and we are currently looking at a delivery timeframe of 2025 or even 2026 to build a large vessel of VLCC dimensions. At the same time, limited yard availability has allowed shipbuilders to push prices up to $120 million to build a new VLCC, and the market has not experienced price levels like this since the tanker ordering boom in 2008.

Therefore, we have a clear view of any new tonnage that will join the VLCC fleet over the medium term. Compared to historical data, the numbers are very low. By our estimation, we expect a further 20 new VLCCs to join the fleet this year, followed by another 15-20 during the whole of 2023. And that is it. No VLCC deliveries are scheduled beyond 2023.

On the flip side, the VLCC fleet is ageing, and there is scope for a significant removal programme. 20% of the current fleet is aged 15 years and older, with 10% of vessels falling into the 18+ years age category. Even if a fraction of this pool of ships is sold for removal, we will see the VLCC fleet reducing in size over the coming years. For comparison, over the last 20 years, an average of 4% of the VLCC fleet has been removed per year. A fleet contraction will be welcomed by tankers owners in a market that has been dominated by tonnage overcapacity for a number of years.

While tanker demand is rising, as Covid-constricted oil demand is in recovery mode, there is still a way to go before there is total balance in the VLCC market. A reduction in fleet supply would get us to a fundamental equilibrium between demand and supply just a little bit quicker.