The outlook for the second quarter is highly optimistic
The crude tanker market continued to strengthen throughout March, bolstered by a reduction in the number of compliant vessels, evolving trade flows, and robust underlying demand. Spot earnings have steadily increased in key segments, with Suezmax and Aframax tankers leading the way.
Kazakh crude expansions boost the Suezmax segment…
Medium-sized tankers have seen the most significant gains this month. Suezmax rates have surged, reaching a 12-month high due to a substantial increase in crude exports from Kazakhstan. More oil is now being shipped from the Black Sea, thanks to the boosted production at the Tengiz oil field in Kazakhstan. This has led to a notable rise in tanker activity in the region. This increase, along with longer voyages to Asia, has significantly reduced tonnage availability and driven up rates.
… while Canadian exports to Europe boost the Aframax segment
Aframaxes also experienced an exceptional month, particularly in the North Sea and the Mediterranean. A major factor was the U.S. tariffs on Canadian oil, which redirected Canadian exports to Europe. With over 75% of these barrels now being transported by Aframaxes, spot earnings have climbed, reaching about $47,000 per day in the North Sea. A limited list of available ships and restricted tonnage from the U.S. Gulf have increased upward pressure.
Geopolitical changes drive demand in ton-miles
In addition to regional developments, broader geopolitical events have had a significant impact. The OPEC+ decision to slightly increase production has introduced more crude into the market, boosting demand for VLCC and Suezmax tankers over long distances. Meanwhile, U.S. tariffs on Canadian and Mexican crude, along with ongoing disruptions in the Red Sea, have altered tanker routes, extending voyages and tightening fleet supply.
Compliant ships sought during sanction periods
The G7's initiative to crack down on the shadow fleet could be another major change factor. With over 20% of the global tanker fleet now considered non-compliant, increased monitoring and enforcement could shift more cargoes to compliant vessels, thereby supporting traditional freight rates.
The global supply of tankers is decreasing, fueling demand
Fleet growth remains constrained, particularly for crude tankers, and with no major deliveries expected in the short term, the fundamentals remain tight. The compliant fleet is gradually shrinking, while sanctioned and shadow vessels are becoming less viable for traditional trade. This structural constraint continues to support earnings across most segments.
Promising outlook for the tanker market in the second quarter
With the increase in oil production, the extension of trade routes, and a decrease in the number of compliant ships, the tanker market appears well-positioned for the second quarter. Suezmax and Aframax tankers, in particular, are benefiting from both structural and situational tailwinds, while VLCCs remain stable due to long-distance demand. If the crackdown on the shadow fleet intensifies, we could see further gains for owners of compliant vessels.
Source : Clarksons, Fearnleys Securities