Oil supertanker rates have seen significant volatility in recent times, influenced by various global economic and geopolitical factors.
Asian freight rates spiral out of control. Freight rates for giant Very Large Crude Carriers (VLCCs) soared on the back of the US crackdown on Russia’s shadow fleet, with rates on the Persian Gulf-China route rising by 53% since the beginning of the year. As of early 2025, supertanker rates, particularly for VLCC tankers, have experienced a sharp increase, with rates jumping from $53,000 to $64,000 per day within a few days, indicating a significant uptick in short-term demand or supply constraints.
For instance, rates for VLCCs on routes from the Middle East to China have doubled since the U.S. imposed sanctions on Russia, reflecting a disruption in the global shipping market. This has led to a rapid reduction in the pool of available ships and intense competition on certain routes.
The surge in rates has been attributed to not only the sanctions but also the broader context of supply and demand dynamics. Increased demand for U.S. crude in Asia, geopolitical risk premiums due to conflicts, and the strategic rerouting of oil shipments due to sanctions on Russian oil have all contributed to the volatility in tanker rates.
The oil market moving into contango, where future prices are higher than current prices, has historically led to increased demand for floating storage, which further pushes up tanker rates. This was notably observed during the oil price wars and demand drops due to global events like pandemics. The current high rates for oil supertankers are a reflection of both immediate supply constraints due to geopolitical actions and broader market conditions influencing oil trade and storage strategies.
The recent relentless oil price rally that saw Brent break $82 appears to have slowed, but backwardation continues to expand in both Dubai and Brent futures. A potential de-escalation between Israel and Hamas, leading to the Houthis ending their maritime warfare in the Red Sea, could bring flat prices lower from next week onwards, but this week remains firmly in bullish territory. Oil prices have stopped rallying as a ceasefire agreement between Israel and Hamas could lead to the end of the Houthi bombardments of the Red Sea, but prices are still set to end the week with a gain, Oil Price reported.
/Bloomberg, Oil Price, Grok/