The tension in the Bab-el-Mandep continues to drive tanker owners to utilise the longer route via the Cape of Good Hope to transport oil from the Middle East to Europe.
Our VLCC fixture data shows that the usual preferred route for the VLCC segment is via the Suez Canal, but since December almost all VLCCs have travelled the longer distance via the Cape. This of course adds to vessel demand as the longer distance adds around 15 days to each voyage.
Source: Tankers International VLCC Database
The impact on the VLCC market following Saudi Arabia’s decision to abandon plans to increase production will be minimal in the near term and could bring a boost for VLCCs down the line.
When we look at our Tankers International fixture app data, it is clear that Middle Eastern producers, including Saudi Arabia, continue to provide a strong baseline for the VLCC segment. Despite OPEC+ production curbs through 2023, fixture counts in the Middle East Gulf remain at record levels. If we include the rising volumes of Iranian masked “Malaysian Blend” cargoes lifted in Singapore – averaging 10 liftings per month in 2023 – there is no change in Middle Eastern crude volumes lifted on VLCCs.
Source: Tankers International VLCC Database
Brazil will continue to play an important role in the crude tanker markets in the coming years. The VLCC segment will be the main beneficiary, followed by suezmaxes.
Production in Brazil has been growing fast, and crude exports have been rising, and the VLCC segment’s share of seaborne exports has risen to 64%. Brazilian exports to China increased significantly in 2023, and nearly all of this cargo is carried on VLCCs.
We see this trend reflected in our VLCC fixture data. Looking at VLCC spot cargo liftings in Brazil, we note steady growth throughout the last decade and a sharp rise in 2023, where we count close to 200 liftings. Brazil remains an important driver going into 2024, and initial data points indicate that VLCC volumes are not slowing down.
Source: Tankers International VLCC Database
How long before India becomes the most important driver of global oil demand growth?
As the world continues to navigate through evolving energy landscapes, we see India ascending as a key player in shaping the future of oil and vessel demand. The country’s rapid economic growth, burgeoning population, and ambitious development initiatives pave the way for increased energy consumption.
India’s appetite for energy could create new opportunities and challenges for the global energy sector. Our VLCC fixture data shows growth in activity into India over the last four quarters and the country remains an important destination for our segment, with January counts at 32 fixtures.
We continue to monitor this data closely to be ready for any opportunities that may arise from these developments, because one thing is for sure; there is no sign of a slowdown from a country boasting high GDP growth and a strong focus on industrialisation and urbanisation, that will ultimately drive oil demand growth.
Source: Tankers International VLCC Database
As China stepped out of its Covid bubble in 2023, we saw the country return to record crude import levels and, with that, a new surge in VLCC activity. Our fixture data counts an average of 17.8 additional VLCC cargoes per month into China in 2023 compared to the year prior.
We have seen a shift in the supply picture, where many Middle Eastern suppliers have been cutting production, and this has left the door open for South American and US suppliers to fill the gap. We note an increase of 4.8 monthly cargoes from South America and 3.6 additional cargoes from the US heading to China in 2023. The tonnemile effect of this shift has been hugely beneficial to the VLCC segment.
Another point to note is 5.1 additional cargoes of the so called “Malaysian Blend” which is lifted from Singapore. These are most likely masked Iranian barrels being re-branded before being sold on.
Going into 2024 Chinese growth is expected to slow down. However, crude demand is still set to rise, and with that, the market will continue to build on an already strong foundation of VLCC activity into the country.
Source: Tankers International Database
