Red Sea conflict continues to add tonne-miles.

The tanker market enters 2024 with strong demand, and while climate targets and sustainable fuels remain front and centre, the demand for vessels that transport fossil fuels is booming, according to Danish Ship Finance. Geopolitical tensions are also at the forefront as tensions in the Red Sea continue escalating, with Iran sending a warship to the region in response to the US takedown of Houthi Rebel small boats that were attacking a Maersk container vessel.

“Tanker vessels are structurally positioned for a great 2024 – Danish Ship Finance.”

Suezmax rates generally gained across the board, with particular strength in the US Gulf as steady enquiry drove rates higher. Markets may expect some cannibalization from VLCC vessels if the disparity in rates continues. In the Atlantic, the West Africa to UK Continent route strengthened to prevent owners from ballasting to the US Gulf.

Aframax markets were mixed with strength in the US Gulf and relative weakness in the UK Continent. However, owner sentiment in the UK Continent is positive on expectations some ballasting towards the US Gulf can support rates. Rates for VLCCs slipped slightly, but with strong activity levels at the end of the week, particularly in the Atlantic, owners finished the week optimistic.

Danish Ship Finance recently highlighted structural factors supporting the tanker market into 2024. The article again focuses on yard capacity, particularly the lack of first-tier yard capacity, which is constrained until the back end of 2025. First-tier yards are increasingly important for tanker newbuilds, given increased environmental scrutiny and the focus on dual fuel capabilities for new vessels. Current ordering activity also points towards reduced yard capacity, as yards reflecting almost 40% of current global yard capacity are set to deliver their final orders before the end of 2025. A lack of orders despite a tight market for newbuilds increases the risk of upcoming yard closures.