A dip in tanker rates has improved the price outlook for U.S. crude this month, as it signals stronger demand. However, the relief may not last too long as most tanker market forecasts for the year still see rates much higher than they were in 2025.
“The shipping markets are freeing up, and rates are tanking from the US to Asia, and the UK to Asia,” one analyst from financial services provider TP ICAP told Bloomberg this week, adding that the trend was boosting demand for U.S. crude oil.
As a result, local U.S. benchmark prices have rebounded, although high-sulfur grades remain pressured following President Trump’s statement that the U.S. will be taking millions of barrels of Venezuelan crude.
The general freight rate situation, however, remains inflated. The reason is rising supply, both from OPEC+ and from the United States, which has tightened the availability of tankers. Last year, this situation resulted in half a dozen new Very Large Crude Carriers making their maiden journey empty, rather than loaded with gasoline, which is standard practice. The reason they traveled empty was to pick up crude cargoes and collect the soaring daily rates.
The unusual strength at the end of the year has seen oil tanker rates on the key shipping routes surge by 467% year to date, according to Bloomberg estimates released in December and based on data from the Baltic Exchange and commodity markets data provider Spark Commodities.
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Also last month, Lloyd’s List reported a sudden nosedive in tanker rates on the Baltic Exchange, with VLCC rates shedding 20% between December 19 and December 22. However, rates remained “the highest since the tail end of spring 2020 floating storage boom,” at $83,882 per day. The freight rates for smaller tankers also remain strong, Lloyd’s List noted in its report.
Some of the tanker rate surge was attributable to the U.S. sanctions on Russian Rosneft and Lukoil that entered into effect in late November. Tanker rates rose in anticipation of a squeeze on the fleet that Russia was using to transport its oil. This week also provided support for tanker rates after the United States chased a Russian-flagged tanker across the ocean and finally captured it in the North Atlantic. The vessel, Bella 1, is under U.S. sanctions. However, its seizure by the U.S. forces indicates intensification of geopolitical tensions, which, combined with the limited availability of tankers, will likely keep freight rates elevated.
