(representative image) VLCCs(very large crude carriers) are largely used to transport crude oil from Middle East to India.
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The unwinding of production cuts by OPEC+ coupled with US sanctions on Russian oil giants Rosneft and Lukoil — which will force India and China to scout for lost barrels from the Middle East and Latin America — is likely to keep charter rates for very large crude carriers (VLCCs) and Suzemaxs elevated.
According to a recent report by the maritime consultancy Drewry, the strong rally in crude tanker stocks this year has been driven by a surge in charter rates, underpinned by rising oil inventories due to increased OPEC+ supply.
“Additionally, the recent sanctions on major Russian exporters Rosneft and Lukoil, have pressured its customers like China and India to reduce exports from Russia. They could instead replace them with imports from alternative sources like Middle East and Brazil which will again increase the tonne-mile demand for mainstream tankers. As a result, charter rates will remain elevated, especially for VLCCs and Suezmaxes,” the consultancy emphasised.
VLCCs are largely used to transport crude oil from Middle East to India.
The Baltic Dirty Tanker Index (BDTI) rose 47.2 per cent YTD, backed by strong performance of VLCC and Suezmax tankers. Higher long-haul trade and increased demand for floating storage have pushed VLCC rates above $80,000pd (per day). For Suezmax vessels, strong trade flows from Kazakhstan to Asia amid tighter sanctions have also lifted rates, further supporting BDTI’s gains, it added.
Freight costs
Santosh Gupta, Deputy Director at Drewry’s Maritime Financial Research, pointed out that the momentum largely began in April-June 2025, when the Iran–Israel conflict raised concerns over the potential closure of the Strait of Hormuz.
This triggered a war premium in charter rates, particularly for VLCCs and LR2 vessels as they dominated that route. Amid these geopolitical conflicts, OPEC+ also began to unwind its previous production cuts, tilting the market towards excess oil supply, he added.
“This, in turn, increased the need for floating storage, further boosting the demand for large crude tankers since (the) effective supply of VLCC for trade will be reduced. As of October, the number of VLCCs used for floating storage had increased 24 per cent as compared to January 2025,” Gupta pointed out.
Companies that operate VLCCs are expected to benefit the most, especially given that the global VLCC fleet is ageing and no new deliveries are scheduled until 2026, which should continue to underpin earnings, he said.
“We expect this positive trajectory of increase in crude tanker stocks to continue for another few quarters, supported by the likely oversupply in the oil market and corresponding firmness in charter rates. Investor optimism about future earnings of tanker companies further bolsters this trend,” Gupta said.
With growing global oil supply and the end of peak summer season, countries that benefit from lower oil prices are likely to continue stockpiling their inventories. China, in particular, has been increasing its imports to fill its reserves, while OECD countries are also restocking. Consequently, it is expected to keep freight rates elevated, especially for larger vessel segments.
Additionally, weak performance in H2 2024, driven by sluggish Chinese demand, sets a low base for stronger y-o-y revenue growth in 2025. As asset prices move in tandem with charter rates, tighter US sanctions on Russian oil could further lift VLCC asset values and vintage tonnage prices further supporting the growth in stock prices, he emphasised.
Published on November 4, 2025
