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?? Crude tanker newbuild contracting surges: A 490% Jump in VLCC Orders

In the dynamic landscape of crude tanker shipping, the first two months of 2024 witnessed a remarkable surge in newbuild contracting, soaring to 7.4 million deadweight tons (DWT). This astonishing 490% leap year-on-year was primarily fueled by a substantial increase in orders for Very Large Crude Carriers (VLCCs). A striking 19 VLCCs were ordered during this period, already surpassing the total number of orders for this ship type throughout the entirety of 2023.

?? Freight rates spike amidst war in Ukraine

Since the onset of the conflict in Ukraine, freight rates for crude tankers have experienced a significant spike, maintaining strength throughout the initial months of 2024. The Baltic Exchange Dirty Tanker Index demonstrated a marginal increase on average compared to the same period in 2023, marking the highest average for January and February since 2006. Notably, VLCCs emerged as the standout performer, experiencing a robust start to the year.

?? Crude tanker orderbook rebounds

In March 2023, the crude tanker orderbook accounted for a mere 3.3% of the crude tanker fleet, hitting its lowest point since at least 1996. However, the scenario shifted rapidly in 2023, witnessing a surge in orders for Suezmax ships followed by a subsequent increase in orders for VLCCs. By February 2024, the crude tanker orderbook to fleet ratio had surged to 6.2%, although the ratio for VLCCs remained at a modest 4.3%.

?? Positive outlook for crude tankers

As highlighted in our recent Tanker Shipping Market Overview and Outlook report, the near-term outlook appears promising for crude tankers. With low fleet growth and longer sailing distances, the supply/demand balance is poised to tighten, particularly benefiting VLCC ships. Forecasts indicate a favorable trajectory for freight rates within this segment.

?? Global trends and future prospects

VLCCs, serving as the largest crude tankers, primarily shuttle crude oil from the Middle East and the Americas to Asia. With a projected increase in oil supply from the Americas and a shifting demand towards Asia, VLCCs stand to gain significantly, given their dominance over these trade routes. Moreover, with 70% of ship capacity contracted in 2023 and all ships contracted thus far in 2024 set for delivery between 2026 and the end of 2027, the support for freight rates remains strong due to minimal fleet growth.

?? Looking Ahead: potential challenges and opportunities

Despite the upbeat medium-term outlook, challenges loom on the horizon. The International Energy Agency's prediction of global oil demand peaking by 2030 presents a potential hurdle. However, the recent upheaval in global trade lanes following Russia's invasion of Ukraine has heightened demand for ships, prompting a need to modernize the aging fleet. Consequently, it is highly probable that we will witness a further uptick in the orderbook throughout the remainder of the year.

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