According to Gibson, "trade data for VLCCs remains uninspiring. In the Middle East, April crude exports did not increase despite OPEC+'s decision to begin unwinding production cuts and remained flat in May based on preliminary trade data. In the Atlantic Basin, however, the signals are more bearish. After a strong rebound in long-haul shipments East during Q1, volumes declined sharply in April and continued this trend into May. This drop is primarily due to West African and US Gulf barrels being diverted to Europe, a trend that has benefitted Suezmaxes and Aframaxes".
"Suezmaxes have also gained from a substantial increase in CPC export volumes - shipments rose by over 400kbd between February and April compared to Q4 2024 averages. Additionally, a significant rise in CPC exports East was seen over the period, with most of the barrels routed via the Cape of Good Hope, providing further support. Aframaxes, meanwhile, benefitted from gradual increases in Libyan production and additional gains in TMX exports, with more direct shipments to Asia. Another critical factor underpinning the market is the wave of sanctions targeting the dark fleet. Combined with a decline in oil prices, this has encouraged more mainstream tonnage to re-enter the Russian crude trade, thereby tightening availability for conventional trades", the shipbroker said.
"Looking ahead, the announced OPEC+ production increases could further support VLCCs in the Middle East. Yet, regional export growth may be constrained by higher domestic crude burn for power generation during the summer and increased refinery runs. Meanwhile, compensation cuts could reduce exports further, although it is uncertain whether these will materialize", Gibson noted.
The shipbroker said that "fundamentally, crude tankers may face headwinds during the summer months as more crude is retained domestically not only in the Middle East but also in the US and Russia during peak demand season. Much will depend on OPEC+ production strategy, with a decision for July output due this weekend. While current supply-demand balances do not indicate a need for further output hikes, internal friction partly due to poor compliance by some members could see OPEC+ continuing to release more crude into the market, suppressing oil prices and boosting commercial and strategic stock builds in the process. On the flip side, this could undermine US crude export potential, though planned production growth in Brazil and Guyana will still offer some incremental support for crude tanker demand".
"The near-term market trajectory will also depend on geopolitical developments. The outcome of Russia-Ukraine peace talks remains critical. A failure to reach an agreement could lead to further sanctions, benefitting mainstream tankers, though a tighter price cap could disincentivize some owners from lifting Russian cargoes. Still, even if peace talks show substantial progress, major shifts in European and Russian crude flows are unlikely in the short term. Similarly, ongoing US/Iran negotiations, discussed in our previous report, are expected to aid the crude sector, regardless of whether sanctions are lifted or reinforced. On the downside, chaotic US trade policy continues to cast a shadow over global oil demand. While many tariffs have been rolled back for now, the remaining duties and the ongoing uncertainty are likely to have a negative, albeit hard-to-quantify, impact on consumption. Suezmaxes may also be pressured if further gains are seen in Dangote runs, although for now Nigerian exports have been shielded by modest production gains and relatively regular imports of US barrels in recent months, occasionally supplemented by other imported crudes. The potential resumption of Red Sea transits is likely to have limited impact on crude tankers due to limited East-West volumes, but LR2s are set to lose a sizable chunk of their demand without re-routing via Cape, potentially prompting some units to shift into the dirty trade", Gibson said.
Meanwhile, "on the supply side, VLCC and Suezmax fundamentals remain favourable. VLCC deliveries are minimal this year, and while 29 Suezmaxes are scheduled for delivery, fleet aging will help mitigate their impact: 25 of these were built in 2005 and are turning 20 years old this year. Still, Suezmaxes may face increased competition from Aframaxes/LR2s, with 63 deliveries expected in this size group in 2025. Although there are also over 60 Aframaxes/LR2s turning 20 years of age this year, most of these units already form a part of dark and/or sanctioned fleet".
Gibson concluded that "all in all, short-term fundamentals are mixed. The market has been bolstered by supply constraints and geopolitical developments. The coming months could be pivotal; with additional OPEC+ output, possible shifts in the Ukraine war and sanctions on Russia, and an Iran US nuclear deal on the table".
Nikos Roussanoglou, Hellenic Shipping News Worldwide