Crude tankers firing on all cylinders as oil in transit soars
CRUDE in transit hasn’t been this high since the floating storage boom at the beginning of the pandemic. This is raising questions about a looming oil supply glut, which could eventually be negative for crude tanker rates as the overhang unwinds.
But it’s not a simple story of a surplus that temporarily boosts tanker rates until producers retreat. Strong exports from the Middle East Gulf and the Americas are only part of the reason for elevated crude in transit.
According to data from Vortexa, the recent surge in volumes at sea is mainly driven by geopolitics: a combination of rising sanctions effectiveness and uncertainty caused by Chinese port fees.
These geopolitical inefficiencies are not only bolstering spot rates for very large crude carriers, but for suezmaxes and aframaxes as well.
Crude supply outpacing demand
Total crude and condensate in transit hit 1.31m barrels per day in the week of October 13, the highest point since the week of May 4, 2020, according to Vortexa data.
If prompt oil prices fall relative to future prices and a steep contango develops, encouraging storage in 2026, “the oil will continue to flow and this may even lead to floating storage”, said Erik Broekhuizen, head of marine research and consulting at Poten & Partners, in his latest report.
“This would give a boost to the large tanker market along the lines of what happened when Covid hit in 2020.
“On the other hand, if lower prices lead to production cutbacks by non-Opec — e.g., US shale — and/or Opec, the tanker market will suffer from a drop in tonne-mile demand,” said Broekhuizen.
Clarksons Securities analyst Frode Mørkedal offered a more positive spin, describing 2026 scenarios for VLCC rates ranging from good to great.
“In a more moderate scenario, even if Opec cuts output by 1.4m barrels per day to 28m bpd, floating storage could still rise to 3%-5% of the fleet, supporting average VLCC rates of around $63,000 per day in 2026,” he said in a client note on Monday.
“While it is unlikely that Opec will sustain 29.4m bpd through 2026, if the group were to remain passive and allow prices to fall sharply, we estimate that about 10% of the global fleet could be tied up in floating storage, pushing average VLCC spot rates above $200,000 per day in 2026,” wrote Mørkedal.
Toril Bosoni, head of the oil industry and markets division of the International Energy Agency, maintained that the supply side will indeed respond, which would take Mørkedal’s ultra-high-rate scenario off the table.
The IEA estimates that the supply surplus, which was 1.9m bpd in January-September, will surge to almost 4m bpd in 2026.
That is an “untenable surplus”, wrote Bosoni in a recent market commentary, asserting that it is “increasingly clear that something has to give”.
The response will be from the supply side, she said, pointing to potential Opec reversals and/or lower US shale production.
Rising role of sanctions
When assessing the supply surplus, it’s important to consider the geopolitical factors that are currently inflating oil in transit.
“Our data shows that the elevated level of oil on water stems equally from barrels exported out of both sanctioned and non-sanctioned regions, a trend that is especially evident in VLCC fleet dynamics,” Vortexa lead freight analyst Ioannis Papadimitriou told Lloyd’s List on Tuesday.
“Long-haul arbitrage flows to China and higher Opec+ exports following the gradual unwinding of production cuts have pushed mainstream utilisation higher.
“At the same time, increased exports of sanctioned grades amid an ever more complex sanctions landscape are delaying discharge operations and encouraging supply chain inefficiencies. This situation has been further aggravated by the newly introduced port fees from China, which could potentially prompt vessel diversions and keep ships laden at sea for longer periods.
“As a result, VLCC utilisation has reached its highest level since the floating storage boom,” said Papadimitriou.
“Aframax and suezmax segments have also recorded notable gains, with the latter currently at two-year highs,” he continued.
“While mainstream demand has been healthy through 2025, the rise in Russian exports and increasingly complex sanction regimes have accelerated vessel transitions from the mainstream to the dark fleet. This shift continues to tighten mainstream [aframax and suezmax] supply and support healthy utilisation rates.”
Vortexa emphasised the rising role of sanctions during a webinar on Tuesday.
Oil-in-transit volumes may be evenly split between sanctioned and non-sanctioned barrels, but the recent spike in the volume at sea was specifically driven by sanctioned barrels, said Vortexa chief economist David Wech.
“We are not seeing a massive surplus of non-sanctioned barrels” in transit versus the seasonal average, he said. “Actually, this crude is arriving relatively smoothly.”
In contrast, “we see a lot of sanctioned crude building up at sea”, Wech said.
“The surplus in the crude market is basically building up in terms of sanctioned barrels that China, and also partly India, are not able or willing anymore to import. This is the segment where the surplus is, and that is important for pricing, because that is of course somewhat separate from the normal market and what WTI and Brent crude prices would reflect,” he explained.
Wech also noted the impact of US sanctions on China’s Rizhao port, an issue that is being highlighted by numerous analysts and brokers.
“That is really having repercussions on China’s ability, at least in the short term, to import crude,” said Wech.
Crude tanker rates strong across all segments
Individual VLCC fixtures are once again nearing and, in some cases, exceeding the six-figure threshold.
The VL Brilliant (IMO: 9683673) was placed on subs at $95,116 per day on Monday for a Brazil-China voyage for Petrobras, according to the Tankers International pool.
Maran Thaleia (IMO: 9527295) was placed on subs on Friday by Glasford Shipping for a Middle East Gulf-Singapore voyage at $110,359 per day. Equinor finalised a fixture on Friday for the Nissos Anafi (IMO: 9856086) at $126,630 per day for a US Gulf-Korea voyage, according to Tankers International.
The Baltic Exchange’s global VLCC time-charter equivalent index has been on a rollercoaster.
It surged to $88,082 per day on September 17, sank back to $56,986 per day on October 7, and rebounded to $85,327 per day on Friday. As of Tuesday, it was at $82,608 per day.
The Baltic’s global suezmax TCE index was at $70,424 per day on Tuesday, down from $72,981 per day on Friday, which was its highest index level since November 6, 2023.
Unlike the suezmax and VLCC indexes, the Baltic’s aframax index has not declined in recent days. As of Tuesday, it was at $49,720 per day, double its level in mid-June and its highest point since April 17.
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