The tanker market remains highly dynamic as geopolitical tensions, tightening sanctions, and shifting trade flows reshape vessel demand. VLCC rates have softened, dropping 20% on key Middle East routes, while Suezmax and Aframax segments are holding firm amid tightening tonnage. Meanwhile, new U.S. sanctions on Russian crude trade are forcing Indian refiners to restructure supply chains, and geopolitical tensions in the Baltic are escalating over potential vessel seizures.
With a mix of short-term bearish rate movements and bullish long-term projections, market players are closely watching fleet supply constraints, trade policy shifts, and evolving crude flows to anticipate the next move.
💡 VLCC Rates Under Pressure Despite Tightening Fleet
The VLCC market has come under significant pressure, with rates on MEG/Vietnam slipping to WS 55* and MEG/Korea at WS 54.25*—a sharp 20% drop. The February MEG program remains behind schedule, and with an increasing tonnage list in the Atlantic, charterers remain in control.
Despite the short-term weakness, investment bank Jefferies remains bullish, increasing VLCC price targets and forecasting:
📈 $55,000/day in 2025 (previously $50,000)
📈 $65,000/day in 2026 (previously $57,500)
A key driver of this long-term optimism is the growing impact of U.S. sanctions. The sanctioned VLCC fleet now represents 10% of total tonnage, with potential to reach 15% if further restrictions are imposed. With VLCC utilization rising from 83% to 88%, Jefferies suggests this could climb to 94%, tightening supply and supporting rates.
However, uncertainty looms as the U.S. crude inventory build continues, and a Trump-Putin dialogue on Ukraine has raised ceasefire speculation, leading to a 2.7% drop in WTI crude.
1 Year T/C - VLCC ECO / SCRUBBER
Rates - Dirty - Spot WS* February 12th 2025
🚢 Suezmax & Aframax Segments Hold Firm Amid Market Tightness
While VLCCs struggle, the Suezmax market is proving resilient, particularly in the Atlantic. West Africa activity appears muted on the surface, but tonnage remains tight as off-market fixtures keep vessels occupied. Rates in the U.S. Gulf climbed by 6.25 points, supported by a lack of ballasters from the UKC/Mediterranean due to poor weather conditions.
The Aframax segment also remains strong, although rates have likely peaked after a sharp surge. The recent hike pushed Aframax levels to parity with Suezmax, making it attractive for owners to lock in profits. With some vessels repositioning to the Mediterranean, the potential for replacement rate hikes remains if demand spikes.
1 Year T/C - SUEZMAX AFRAMAX ECO / SCRUBBER
🌍 Geopolitical Tensions: Baltic Confrontation & Indian Refiners' Supply Shift
The Baltic region is heating up, as Russian lawmaker Alexei Zhuravlev warned of retaliatory measures in response to reports that Nordic and Baltic nations plan to seize shadow fleet tankers carrying Russian oil. This raises the risk of direct confrontation, with Europe looking to justify tanker seizures under piracy laws and environmental regulations.
Meanwhile, India’s refiners are scrambling to adjust to fresh U.S. sanctions on Russian oil. With 160 tankers blacklisted, Indian refiners like IOC, Bharat Petroleum, and Reliance are facing the loss of 18-20 cargoes in March—a 14% drop in monthly Russian crude imports.
To adapt, new Dubai-based trading entities are emerging, replacing sanctioned firms. Refiners are also utilizing onshore storage in Fujairah to disguise Russian crude origins, maintaining supply flow despite the latest restrictions.
🚢 The Effect of U.S. Trade Policies & Market Reactions
Beyond sanctions, U.S. trade policy shifts are creating new challenges. Potential tariffs on Mexico and Canada could significantly impact U.S. crude supply chains, leading to:
📊 Higher costs for U.S. refiners
📊 Increased redirection of Mexican fuel oil to Asia & the Caribbean
📊 Ripple effects on Canadian and Mexican export strategies
Meanwhile, Chinese refiners are actively diversifying crude sources, concentrating purchasing power among major players. This shift further consolidates market power in the hands of larger refiners, while smaller players struggle to adapt.
Greek tanker operators remain at the center of these evolving crude flows. Despite rising scrutiny, Greek-owned tankers continue to dominate Russian fuel oil transport, taking advantage of shifting trade patterns as traditional routes become increasingly complex.
🚨 Looking Ahead: Volatility, Risks & Opportunities
The tanker market is at a crossroads, with a mix of bearish short-term pressures and bullish long-term fundamentals:
🔸 VLCC rates under pressure, but Jefferies sees upside in 2025/26
🔸 Suezmax and Aframax markets remain firm, benefiting from market tightness
🔸 Baltic tensions could escalate, impacting shadow fleet dynamics
🔸 India’s crude trade is shifting, as refiners bypass U.S. sanctions
🔸 Oil prices react to geopolitical shifts, with Trump-Putin talks impacting WTI
🔸 U.S. trade policies could reshape crude flows, particularly with Mexico & Canada
As we move through 2025, sanctions, geopolitical risks, and shifting trade routes will continue to create volatility—but also opportunity. Navigating these changes effectively will be key to capitalizing on emerging market dynamics.
💬Let's connect!
What are your thoughts on the latest tanker market developments? Feel free to share in the comments and don't forget to like and share this post 🚢
*The Worldscale (WS) rate is a system used to calculate tanker freight rates, where WS 100 represents a standard base rate for a specific route. Rates above or below this benchmark indicate how much more or less a charterer will pay relative to the base cost. A higher WS rate means better earnings for shipowners, while a lower WS rate means lower transportation costs for charterers.
