Short-Term Tanker Market Shaken Up by Geopolitics

February 12 ------ McQuilling Services has released its 29th anniversary edition, 2026-2030 Tanker Market Outlook with the theme: “You Can’t See the Forest for the Trees.”

The report frames the outlook for crude tankers over the next five years. Structural forces (the “forest”) including: 1) macroeconomic conditions, 2) a weakening US dollar, 3) a commodity price super cycle, 4) emerging market oil demand, and 5) global shipyard capacity constraints are expected to dominate market direction. Geopolitical developments (the “trees”) will continue to introduce volatility and shake-up short-term balances but do little to derail the underlying medium-term structural trend.

Following introduction of these trends in last year’s report, McQuilling finds 2025 developments as confirmation of its analysis, and its conviction is even stronger that the tanker markets are in the early stages of a multi-year commodity cycle last observed in 2002-2010.

Over the 2026–2028 period, oil market fundamentals point to a bifurcation along the pricing curve. The expanding global crude balance in 2026 is expected to weigh on the front end of the curve, while resilient economic activity in emerging markets -supported by a weaker US dollar following US Federal Reserve rate cuts—should underpin the back end.

The growing oil demand and insufficient upstream investment at current price levels are expected to reinforce support for forward-dated pricing. As markets increasingly recognize the risk of future supply inadequacy, the crude forward curve has effectively shifted since Q4 2025 from backwardation to demand-driven contango (with future deliveries priced above spot).

Middle East exports are expected to meet most of this incremental oil demand, providing substantial support for VLCCs. The Americas are also set to play an increasingly important role in VLCC demand growth, including improved logistics after Exxon lifted seasonal VLCC restrictions in Guyana and a new VLCC terminal in Argentina is expected in late 2026/2027.

Higher export volumes from Brazil, and the redirection of Venezuelan heavy crude flows to the US Gulf could unlock significant growth in US-produced light crude exports by VLCCs. As the VLCC fleet remains constrained in 2026-2027, McQuilling maintains its call for a firm VLCC market, with spot earnings for ECO tankers without scrubbers averaging US $87,000/day over this two-year period.

Firm VLCC fundamentals are expected to provide “top-down” support to mid-sized crude tankers, as charterers are increasingly incentivized to deploy smaller vessels where feasible to reduce freight costs on a US $/bbl basis. With approximately 438,000 b/d of Venezuelan crude redirected to the US Gulf, Aframaxes are expected to see a meaningful tailwind, supported by growing Venezuela>USG crude movements and USG>Venezuela dirty naphtha diluent flows as a backhaul.

Additional upside exists should oil majors resume investment in Venezuela’s oil infrastructure and China continue substituting heavy/sour crude feedstocks with imports from Vancouver via the Trans-Mountain pipeline. ECO Aframax spot earnings are expected to average US$54,000/day in 2026 before trending lower, as LR2s increasingly switch into dirty trades in pursuit of relatively stronger earnings.

Upside-sport for MR2 tanker demand will be largely concentrated in the Atlantic Basin, which is expected to encourage tonnage migration from the East to the West of Suez market. The US Gulf remains the primary source of demand support, as refining margins could benefit from higher distillate yields from Venezuelan heavy crude feedstocks, while Latin American countries increasingly replace Russian and Far East imports with oil supplies from the US Gulf. However, significant MR2 supply pressure is anticipated in 2026 following record ordering activity in 2023–24 (307 vessels), although ordering momentum moderated to 79 vessels in 2025.

Some relief could emerge if the chemical tanker market recovers, prompting oil-to-chemical switchovers for IMO II-class MR2s. Our call for ECO MR2 spot earnings to average US $27,000/day in the 2026-2030 period. Shipyards in Northeast Asia are facing prolonged orderbook turnover due to reduced productivity, an aging workforce, and broader demographic challenges. Policy uncertainty has also emerged as a key risk factor, including the USTR’s Section 301 investigation into China’s shipbuilding industry, and the postponement of the IMO Net-Zero Framework vote.

As global merchant fleets built during the 2005-2012 single-hull phaseout era gradually age out, ordering new oil tankers will face intensifying competition from LNG projects, mega-container orders, and an eventual dry bulk replenishment cycle, all of which are rapidly tightening global shipyard capacity. This, combined with our view of rising commodity prices (oil, steel) and a weakening US dollar, points to further increases in newbuilding contract prices.

McQuilling expects VLCC newbuilding prices to rise to US $187 million by 2028, still below the inflation-adjusted peak observed in 2007–2008.

Source: marinelink.com