2024 As of today, VLCC charter rates remain lower than Aframax and Suezmax tankers. Compared to the volatility of 2023, VLCC performance has been more stable this year, although peak levels have not reached the heights expected, while at the same time, lows have not fallen significantly.
Mette Frederiksen, head of research at London-based VLCC Pooling (VLCC Pooling) Tankers International, said that with OPEC+ (OPEC) releasing positive signals on production increases, limited VLCC newbuilding growth, coupled with rising oil demand this year, the VLCC supercycle will be the It is a question of "when, not if".
Tankers International, which operates a pool of 36 VLCCs, said the VLCC market showed "moderate improvement" in the first half of the year, but failed to reach the level of other market segments.
The fundamentals underpinning the VLCC market have remained unchanged since the beginning of the year, Mette Frederiksen noted. The main driver continues to be the lack of fleet renewal and the low number of new deliveries. Decommissioning volumes remain subdued due to relatively strong returns and an optimistic market outlook. In addition, the persistence of the "dark fleet", especially for older vessels, provides an alternative outlet, with the VLCC order book representing only 7 per cent of the existing fleet, while at the same time some 21 per cent of vessels are more than 20 years old, implying a further tightening of the fleet's supply/demand balance.
Meanwhile, Houthi attacks on merchant vessels in the Red Sea have had a significant impact on the product tanker market, but relatively little on VLCCs.
The ongoing Russian-Ukrainian conflict is continuing to play a crucial role in reshaping all tanker segments, including VLCCs. Russian oil continues to be channelled to buyers outside of Europe, prompting Europe to source oil from alternative sources such as the US, West Africa and the Middle East. This dynamic translates into more transatlantic trade, with VLCCs becoming more competitive as economies of scale take effect. This does not necessarily mean longer tonne-nautical mile voyages, but these routes offer more creative trading opportunities.
He noted that the Middle East to Far East route remains the backbone of the VLCC market. While OPEC+ production cuts are restricting the flow of oil from the Middle East, positive signals are already appearing, with recent announcements from OPEC+ indicating that previously restricted production will be gradually reduced from October onwards, and that OPEC+ plans to increase production by 2.5 million barrels per day over the next 12 months. This includes resuming voluntary production cuts of 2.2 million barrels and allowing the UAE to increase production by 300,000 barrels per day. In addition, the market expects increased supply from the US, Canada, Brazil and Guyana. This could boost demand for VLCC tonne nautical miles.
Meanwhile, improving economic conditions in China will boost oil imports and the market outlook for VLCCs. China's oil demand is expected to grow from 16.5 million barrels per day (bpd) last year to 17.3 million bpd by 2024, according to the International Energy Agency's forecast this month.
Mette Frederiksen concluded, "VLCCs have shown resilience in the first half of 2024. While not experiencing the sharp upturns seen in other segments, the performance has been stable and all indicators for the remainder of the year are favourable. We remain optimistic that VLCCs have the potential for a super cycle this year."
https://www.cnss.com.cn/html/hygc/20240724/354172.html
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