BIMCO is reporting a significant surge in crude tanker newbuild contracting in the first two months of 2024, with a 490% year-on-year increase to 7.4 million DWT.
This spike is attributed to a rise in orders for Very Large Crude Carriers (VLCCs), with 19 units ordered, surpassing the total number of orders in all of 2022.
Freight rates for crude tankers have remained strong since the start Russia’s war in Ukraine, with the Baltic Exchange Dirty Tanker Index reaching its highest average for January and February since 2006.
In March 2023, the crude tanker orderbook was at its lowest since 1996, accounting for only 3.3% of the fleet. However, a surge in Suezmax and VLCC orders caused the ratio to climb to 6.2% by February 2024.
BIMCO’s recent Tanker Shipping Market Overview and Outlook report highlights a positive near-term outlook for crude tankers, with low fleet growth, longer sailing distances, and an especially favourable outlook for VLCCs that could support freight rates in the segment.
BIMCO anticipates that a shift in oil demand towards Asia and increased oil supply from the Americas will not only extend sailing distances, but also significantly benefit VLCCs, which primarily transport crude oil from the Middle East and the Americas to Asia.
According to BIMCO, 70% of ship capacity contracted in 2023 and all of 2024 will be delivered between 2026-2027, supporting freight rates due to low fleet growth.
Despite increased contracting, the risk of oversupply from 2026 appears low at the moment as the orderbook remains historically small. However, the need to renew an aging fleet and higher demand for ships due to global trade lane restructuring from Russia’s invasion of Ukraine, suggests the orderbook will continue to grow for the rest of the year.
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