Benchmarks align with our bullish view
Overview - Based on analysts canvased at the end of December, our forecast stands out as bullish relative to ‘the pack’. We were also significantly more bullish than the available benchmarks (FFA, TC etc.). However, Sinokor consolidation move late Dec/early Jan, and US blockade of Venezuelan crude exports and removal of Venezuelan president at the start of the year has brought paper and TC rates more in line with our current forecast for 2026 and 2027.
Outlook: 2026 VLCC - by mid-month Cal 2026 TD3c FFAs now $71k/day, up from $50k at start of year. Braemar one year TC assessment $70k/day – up from $57k last week. Braemar research says $71-79k/day with mean of $75k/day basis weighted triangulated earnings of eco non-scrubber. 2026 Suezmax - By mid-month Cal 2026 for TD20 FFAs up from $36k -$49k/day since early Jan. One year TC at $50k/day, up from $45k/day last week. Braemar Research says $51-$57k with mean of $54k/day basis weighted triangulated earnings of eco non-scrubber. 2027 VLCC - By mid-month Cal 2027 TD3c FFas now $50k/day, up from $39k/day at start of year. Braemar research says $53k-67k/day with mean of $75k/day basis weighted triangulated earnings of eco non-scrubber. 2027 Suezmax - By mid-month Cal 2027 for TD20 FFAs up from $27k -$34k/day since early Jan. Braemar Research says $38k-$48k/day with mean of $43k/day basis weighted triangulated earnings of eco non-scrubber.
Forecast methodology: Two demand scenarios used: the expected regional growth in refinery runs made by 1) the IEA (low growth of +1% over the 5 years to 2030) and 2) OPEC (high growth of +8% over the same 5 years). Two geopolitical scenarios: separately we project two geopolitical scenarios, 1) where todays’ sanctions remain in place while shadow crude oil continues to flow (at 800k b/d for Venezuela; 3.4m b/d for Russia (excl. CPC) and about 1.5m b/d for Iran), much of it on sanctioned and unsanctioned shadow tonnage 2) assumes shadow flows (or their replacement) become free to move undiscounted on compliant tonnage from Q2 2026. While we believe further western sanctions on vessels are likely to bring shadow regimes to heel, we expect the next twist of the thumb screw to target shadow exports themselves. Our ‘mean’ forecast is the average of four scenarios – all of which are given equal weighting.
Why are we more bullish than the benchmarks?
We are well into the ‘end game’ with regards to shadow crude exports (see slides 16-24). This end game could be protracted and will involve sanctioning more tankers that move shadow exports (pulling unsanctioned tankers into the shadow fleet) and replacing a share of shadow exports with compliant exports on compliant tankers. Until recently the end game has been delayed by tight oil markets. But by Q3 2024 not only had oil prices had fallen below $65/bbl (from over $100 in 2022), but the reversal of OPEC production cuts and weak oil demand had created an expectation of future oversupply. This gave the West (Trump) freedom to move beyond trying to cut the price of shadow oil relative to compliant fuels and focusing instead on restricting shadow exports through secondary sanctions, tariffs and greenlighting Ukrainian attacks on Russian oil infrastructure. We expect to see Russian exports continue to reduce (India imports of Russian crude dropped 32% to 1.25m b/d mom in December and should fall further in January; Turkey imports of Russian crude are down to 200k b/d from 350k b/d in summer), requiring replacement India and China imports on compliant tankers. This will negatively impact Aframax demand (i.e. the positive from switching from non-compliant to compliant tankers does not quite outweigh negative from lost Aframax tonne miles as less Russian crude moves to India). Will boost demand for VLCCs to replace Russian oil with Indian imports from the Mid East and Atl. Basin. Replacing Venz crude in China will boost demand for compliant VLCCs. End of Iran regime is a legitimate scenario (possibly precluded by oil workers strike). Ultimately this will cut discount on Iranian crude, which will increase flows on compliant VLCCs.
The recent Sinokor ‘play’ looks to have significantly consolidated the VLCC fleet. While the move makes VLCC markets more difficult to read, we view the development as bullish for freight as Sinokor has a record of using its scale to influence charter hire.
If few vessels are scrapped (which seems likely in the strong freight environment we expect to see) but useful capacity is lost as vessels age, the useful capacity of the Suezmax fleet could grow 4.5% this year and 5.6% next year. The useful capacity of the VLCC fleet could grow by 2.6% this year and 5.6% next year. However, we expect further sanctions and loss of shadow exports to reduce fleet growth to below the level of demand growth. This is because useful capacity of the older tanker fleet falls sharply. Crude tonne-mile demand growth will be slow at 1.6% this year and 0.4% in 2027. The end of discounted crude (in a scenario where Russia + Iran + Venz come in from the cold) also spells the end of VLCC trade for the majority of the 145 VLCCs currently over 20 years old. We accept that 2026 is a busy year for Suezmax NB deliveries (43 in 2026 f/b record 54 in 2027), but VLCC NB deliveries are not excessive this year (34). However, next year we could welcome 70 VLCC NBs, which comfortably outpaces the 27 VLCCs that hit 20 years old that year and will put downward pressure on VLCC rates.
Key geopolitical drivers
Venezuela - the removal of Maduro, blockade of exports of Venezuelan exports on shadow tankers, and control over Venezuela’s exports by the US administration pushes demand onto the compliant fleet. Putting aside the question of US investment increasing Venezuela’s production, Venezuela’s current 800k b/d is likely to shift from shadow VLCCs to the compliant Aframax fleet bound for the US. Which crude grades may be dislodged from the US Gulf? It could be Canadian crudes which arrive in the region via pipeline. This would increase Canadian crude exports from the US Gulf (currently 420k b/d) to either Asia or Europe. We think it more likely that light-sweet WTI would be pushed to the export market, given Canadian crude is heavy and sour and desirable for US Gulf refineries. Europe’s crude demand is not growing, and it would be unlikely to take on more lighter crudes (Europe is long on gasoline and short on middle distillate). We think it most likely WTI dislodged from the US Gulf would be sent to Asian refiners – a big positive for tonne-mile gains on compliant ships.
Iran - although the possibility of a US strike on Iran appears to have receded for now, Iran’s exports fell by 646k b/d m-o-m in December to 1.2m b/d. This is likely due to both challenges in fleet availability as vessels are tied up in floating storage in East Asia, and a lack of buying appetite from the teapot refiners, which are awash with discounted crude feedstock. China’s imports of Iranian crude were around 1.1m b/d in December, about 200k b/d under the 2025 average, but should continue to increase thanks to the granting of new import quotas. Crude in onshore storage tanks in the Shandong province has built by around six million barrels since late December, indicating the teapot refiners are beginning to absorb some of the shadow crude in floating storage. To increase exports, shadow VLCCs that lifted in Venezuela could shift to lift Iranian oil or carry oil into Shandong ports if free of US sanctions. But the ships already seized by the US in the Venezuela crackdown over the last few weeks had history of handling Iranian cargoes. It’s not a given that these tankers could easily shift over to Iran. Furthermore, now that America’s newfound appetite for seizing dark fleet vessels has thus far gone unchallenged, we could see a new tactic to pressure the embattled Iranian regime. Halting flows with vessel seizures combined with further rounds of tanker sanctions and sanctions on teapot refiners could be an effective method to increase economic pain on the Iranian regime.
Russia - Russian oil is the third prong of the shadow market that could be challenged with vessel seizures. Though exports remain at high levels (3.77m b/d in December), Russia is struggling to find buyers. India has sharply reduced its purchases, replacing these volumes with imports from mostly the Middle East and a smaller share from the Americas. India’s imports of Russian crude were down 600k b/d m-o-m to 1.25m b/d in December and have fallen to around 1m b/d in the first half of January. The sanctioned Nayara refinery has increased its imports of Russian crude. The terminal linked to the refinery shows imports of Russian crude almost 120k b/d higher than before it was sanctioned (300k b/d compared to 420k b/d). Russia’s crude exports averaged 3.45m b/d in 2025. As Turkey and India have so sharply reduced imports in recent months, a lot of Russia’s crude has been displaced towards the Chinese teapot refineries, which have increased their imports by 16% in December to 1.5m b/d. But this still doesn’t cover all of Russia’s export volume, explaining the 70% rise in the barrels in floating storage in the first half of January compared to the December average (+ 5.82m b/d). Russia’s barrels are struggling to find homes. India (excluding Nayara) could reduce its purchases of Russian crude even more in the coming months, as Europe’s ban on refined products made with Russian feedstock goes into effect. Trump has also greenlit the vote on the US Senate bill which would put 500% tariffs on countries importing Russian oil. This bill has bipartisan support.
Impact of ‘shadow end game’ on Chinese imports - 30% of all China’s import volume is shadow crude (~3m b/d). There is no urgency for Chinese teapots to seek replacements yet, given the record-high levels of shadow crude on the water and high stocks in storage tanks. Iranian exports (continuing for now) and high Russian exports are being pushed to the teapot refiners. In the event of a serious disruption to shadow crude, teapot refiners would cut run rates. Some would push forward planned maintenance. With longer disruptions, some of the refineries would begin going out of business. If forced to buy non-shadow crude, the cheapest and most similar crude grade teapot refiners could substitute would be Canadian crude exported at TMX in Vancouver. But this crude would still be too expensive for the margins for most refiners. Furthermore, refiners under sanctions – currently eight teapot refiners – would not have the option to purchase non-shadow crude. In the event of large-scale closures of the teapot refiners, demand would shift into the State-owned refiners, who would buy increased volumes from the compliant market. This would shift volume onto compliant VLCCs out of the Middle East and barrels.