The VLCC sector has returned to the center of attention, with spot freight rates soaring in September to levels close to $100,000 per day on certain routes. For shipowners, this rally is a welcome change after months of relatively muted earnings, while charterers find themselves struggling to secure tonnage at competitive prices. Behind this sudden surge lies a convergence of factors on both the demand and supply side, amplified by geopolitical and regulatory developments. What are these factors? Can this rise be sustained?
Middle East Exports Lead the Way
At the heart of the rally there is a sharp increase in exports from the Middle East. OPEC+ production increases have pushed exports above 18mbpd, one of the highest levels since 2023. The steady flow of cargoes, primarily to Asia, is driving VLCC demand, while there is apparently limited supply of available tonnage, putting pressure on the spot market.
Long-Haul Voyages “Tie Up” Ships
It’s not just the volume of oil that matters, but also its origin. Cargoes from the US Gulf, Brazil, and West Africa are now heading to Asia, keeping vessels occupied for weeks. This reduces availability of new charters, tightening further the spot market and pushing rates higher.
China: Importing for Storage
China remains a pivotal player. Although domestic demand growth is modest, Beijing continues to build strategic inventories whenever crude prices are attractive. These storage-driven imports often involve long-haul voyages, creating incremental ton-mile demand and providing another support pillar for VLCC utilization.
India’s Shift Away from Russia
India, under pressure from both the US and the EU for its reliance on discounted Russian crude, has started to diversify its supply sources. Greater reliance on Middle Eastern barrels and increased purchases from West Africa and the U.S. Gulf mean more cargoes are moving on VLCCs instead of Aframaxes or Suezmaxes. This shift has added another layer of demand for the largest crude carriers.
Sanctions and USTR Regulations Add Pressure
Sanctions continue to remove a significant number of the VLCC fleet from mainstream business. According to TankerTrackers, around 177 vessels, nearly 20% of the fleet, are now sanctioned. While many still operate in alternative trades, their absence from open markets reduces flexibility for charterers. On top of this, USTR regulations coming into effect on October 14 will impose heavy fees on Chinese-owned or operated tankers calling at U.S. ports. Chinese owners are already repositioning their vessels to avoid penalties, introducing inefficiencies and further tightening the market.
Seasonal and Psychological Factors
September also marks the end of peak energy demand for local consumption in the Middle East, freeing up additional barrels for exports. Upgraded forecasts from many analysts for VLCC rates in 2025–26, further boost owners’ confidence and optimism.
A Tightening Fleet: Few Deliveries, High Scrubber Premiums
On the supply side, the fundamentals are equally bullish. Deliveries of new VLCCs are at historic lows: just one entered the global fleet in 2024 and only two more have been delivered so far this year. This stagnation in fleet growth has amplified tightness. At the same time, modern scrubber-fitted vessels are commanding strong premiums thanks to fuel efficiency advantages.
Despite the rally, challenges remain. China’s storage demand could decline, and new VLCC deliveries in 2026 may ease tightness. The current momentum relies on a convergence of strong exports, limited fleet, and storage-driven voyages, factors that may shift in the future.
For now, VLCC owners enjoy a rare combination of high freight rates and limited supply. Whether this rally proves to be the start of a longer upcycle or a fleeting moment, September demonstrated how quickly the market can change when key drivers align and it will be remembered as the month that VLCCs were back in the spotlight.