The market overcame volatile trends at the beginning of the month
The tanker market experienced diverse trends at the start of May, with both upward and downward pressures at times. Crude rates initially fluctuated before regaining momentum in mid-May, bolstered by increased chartering activity.
By the end of May, the average earnings for VLCC and Suezmax tankers had stabilized, and the product tanker segment demonstrated significant strength, reaching its highest levels in two months, with average earnings exceeding USD 25,000 per day.
The increase in OPEC+ supply shapes the outlook
A key factor this month has been the gradual unwinding by OPEC+ of voluntary production cuts. The group plans to reintroduce 960,000 barrels per day (b/d) of oil to the market between April and June and may completely reverse the previous reduction of 2.2 million b/d by October. The additional volumes of crude transported by sea are expected to support global tanker demand, particularly for long-haul routes of VLCC and Suezmax from the Middle East.
According to Arctic Securities, handling the additional volumes might require the equivalent of 70 annual Suezmax shipments, which would further tighten the tonnage balance as supply increases.
Sanctions and the shadow fleet strengthen market balance
The role of the shadow fleet is becoming increasingly significant. These vessels—mainly older tankers carrying oil under sanctions from Russia, Iran, and Venezuela—now account for approximately 23% of the global fleet. Regulatory pressure on this segment intensified in May, with over 340 ships sanctioned by the UK and the EU. Several incidents, such as a ship being detained in the Baltic and renewed security concerns in the Middle East, have heightened compliance risks associated with the operations of the grey fleet. Discover our assessment of the future impact of the shadow fleet on the market here.
Fundamentals support promising prospects
Leading analysts from Clarksons and Fearnleys now highlight a clear improvement in the structural outlook for the tanker market. With the increase in oil supply, heightened regulatory scrutiny on non-compliant vessels, and a historically limited order book, the market balance is tightening. Although the spot market may remain volatile in the short term, the overall setup for the tanker segment is positive and increasingly supported by strong fundamentals.
Sources: Arctic Securities, Clarksons, Fearnleys Securities, Tradewinds.