28 November 2025 E.A. Gibson Shipbrokers Ltd
Crude and product tanker markets have been under heavy pressure so far in Q4, with clean West rates currently the only bright spot. Whilst markets are frequently volatile, persistently weaker returns in the middle of a traditionally strong fourth quarter are causing concern. What are the demand factors behind weaker rates and earnings?
Aframaxes have been under the biggest pressure on the crude side. Kpler data shows global crude tonne miles for this size group are down by circa 2.5% year-on-year during the first ten months of 2024, despite the start-up of the expanded TMX pipeline and an uptick in trade out of the US. Here, the largest decline in tonne miles have been seen out of Russia; yet, Red Sea attacks and maturing crude production in Asia have added further downward pressure, whilst recent outages in Libya and field maintenance in the North and Caspian Seas have also temporarily reduced demand.
In contrast, VLCC demand is up modestly year-on-year, with less trade out of WAF/USG and lower demand into China being offset by increases in shipments out of Latin America, whilst smaller gains earlier in the year were also seen in VLCC shipments from the UKC.
The picture is more complex for the clean tanker market. Averaging data for the first ten months of this year, LR2 tonne mile demand is notably up year-on-year, much smaller gains are seen in MR demand, whilst LR1 and Handy demand is modestly down. Increases in LR2 demand are largely driven by diversions via the Cape of Good Hope and absolute gains in AG/India-West trade. However, if we zoom into the data in greater detail, LR2 tonne miles surged during the first five months of the year but have since been under downward pressure due to dirty-to-clean switching. LR1s have also suffered from this development. MRs and Handies have been negatively impacted by lower clean exports out the UKC/Med, most notably in recent months amid heavy European refining maintenance and declining exports into West Africa. In addition, Handies have been further pressured by rising competition from MRs. In the East, MRs have suffered from lower intra-regional CPP trade. Across all clean tanker segments, a clear decline in tonne miles has been observed for shipments out of Russia.
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