Trade disputes, sanctions to support tanker freight rates despite fleet expansion

Global dirty and clean tanker freight rates are likely to be firm this year due to trade disputes and sanctions, despite a large supply of newbuilds expected to enter the market, participants said Jan. 19.

There is certainly going to be a large growth in the tanker fleet during this year and the next than we have had in the last two years, said Ralph Leszczynski, research director with Genoa-based shipping consultancy and brokerage, Banchero Costa.

During 2024-25, hardly half a dozen new VLCCs were delivered, while in the next two years, such deliveries will be almost 100, according to Bancosta's estimates.

More newbuilds will enter the market but should be well-absorbed by the expected increase in sanctions-compliant trade, said Ole-Rikard Hammer, Oslo-based senior oil and tankers analyst with Arctic Securities.

Compliant trade involves moving cargoes and using tankers that are not sanctioned by the US, the UK and the EU.

The total seaborne crude trade rose almost 2% year over year in 2025, increasing the demand for tankers. VLCC fleet utilization was close to 90% during the second half of 2025, said Leszczynski.

Sources also cited fleet consolidation as a potential reason for higher freight. China's Sinokor has been trying to expand its fleet of about 45 VLCCs by more than 80%. If most deals go through, half a dozen owners will control nearly a third of the global fleet of almost 900 VLCCs, brokers said.

Sinokor declined to comment.

Dirty tankers ended 2025 on a high, with daily spot earnings for VLCCs and Suezmaxes remaining above $100,000/d and $80,000/d during a large part of December, London-based Director of shipping consultancy Maritime Strategies International Ltd., Tim Smith, said in its latest report.

Cargo volumes, or oil on water, remain high due to a rise in trade rather than floating storage, though there have been discharge-related delays as well, Smith said.

Compliant versus shadow fleet

The benefit of higher trade is accruing to compliant tonnage.

Unlike previous years, when the shadow fleet reaped the benefits of sanctioned trade, this is going to be a "revenge" year for owners of compliant tonnage, added Hammer. This is because they will capture all the growth in trade amid tightening sanctions on Russia, a change of government in Venezuela and unrest in Iran.

Any return of Venezuelan and potentially Iranian crude into the compliant, mainstream market would turn prospects bullish for tanker freight this year, said Leszczynski.

Ukraine's drone attacks on shadow tankers in the Black Sea have made operating them increasingly difficult and risky, he said. It is extremely difficult for tankers in the shadow fleet to return to "regular" trades. Therefore, an effective crackdown on such trade would push these ships toward demolition, which, of course, would benefit the fleet balance and improve the compliant fleet's utilization, he added.

Arctic's Hammer said the shadow fleet is aging and becoming less productive, which will limit the overall fleet growth. Its size is already 15% of the global tanker fleet, including 17% of the VLCCs and Suezmaxes, and one-fourth of the Aframaxes and LR2s, according to Bancosta estimates.

Oil on water hits postpandemic highs

Shipping brokers in Asia estimate crude on water is now more than 2.6 billion barrels. This would be the highest since the pandemic, said Smith.

Larger volumes on the high seas lead to greater demand for tankers and support freight.

The Platts global VLCC indexes are reflecting this strength in freight. The non-scrubber, non-eco, or GVI 7 and the scrubber-fitted, eco, or GVI 7S index have been holding above the key psychological mark of $50,000/d for more than four and a half months.

The GVI 7 and the GVI 7S, which track seven key routes, clocked daily weighted earnings above $100,000 for 32 and 39 days, respectively, in 2025. Platts is part of S&P Global Energy.

If Venezuelan crude displaces Canadian and Mexican exports to the US, there is a possibility of more oil flowing from the North Pacific to China, said Enrico Paglia, a Genoa-based research manager with Bancosta. This could support demand for tankers as less oil would be moved via pipelines and short-haul routes, Paglia said.

Demand is also positive for clean tankers because the disruption expected from the new EU sanctions, which prohibit shipments of refined products made by third parties from Russian crude, is now unlikely to occur. Companies such as India's Reliance have claimed that they will be fully compliant with these rules by segregating the refining of Russian and non-Russian crude.

The estimated average LR2 tanker earnings on the Persian Gulf-Japan route are likely to be about 37% higher in the current quarter at $40,300/d compared with the third quarter of 2025, MSI said. The brokers estimate the current daily earnings on this route at $56,000, assuming bunker fuel prices of about $450/metric ton in Singapore. This would be 3.7 times higher than daily earnings in mid-October 2025, brokers said.

The number of crude tanker fixtures increased in the second half of 2025 and the clean products segment will follow suit in 2026, said Hammer.