• A Fragile Recovery in VLCCs Amid Macro Headwinds – The VLCC market appeared to have found a temporary floor in early March, with shipowners showing renewed optimism for a potential recovery. Activity levels initially picked up as charterers sought to cover outstanding second-decade stems and advance bookings for the third-decade program. However, despite some resistance from owners, broader market weakness—particularly in other regions—has kept a significant rebound in check. In the East, market sentiment remains fragile as VLCC AG to China rates ended the first week of March with a slight decline. The softening reflects underlying concerns over Chinese crude demand, with recent import figures showing a 5% year-on-year drop for January and February. This has dampened confidence in sustained freight rate gains, as uncertainty over future crude demand growth weighs on long-haul tanker prospects. Overall, while pockets of resilience exist, prevailing macroeconomic headwinds and soft demand fundamentals remain key obstacles to a sustained rate recovery in both the East and West. The recent momentum in freight markets continues to be tested by uncertainties in the oil market, particularly growing concerns over Chinese demand. With China’s crude oil imports down year-on-year, fears of weakening demand for long-haul crude shipments persist. Nevertheless, shortterm market tightness and the clearing of early-positioned tonnage should provide some near-term support for VLCC rates.
• OPEC+ Confirms Production Increase Despite Demand Headwinds – Despite a lackluster outlook for global oil demand, OPEC+ appears poised to gradually increase production in accordance with last year’s announced schedule. While the initial increase is relatively modest—approximately 140,000 barrels per day— the mere indication of rising production intentions was sufficient to trigger a significant selloff in oil prices. However, the pressure on prices is not solely due to the potential for additional supply. Demand growth remains weak, with few foreseeable catalysts that could alter this trajectory. Although recent stimulus measures from China might provide some support, fundamental indicators suggest a structural shift in the region’s oil consumption—an overall negative for future demand growth. Additionally, any supply shortfall resulting from tightened sanctions on Iran could be readily offset by the more than 5 million barrels per day of spare capacity available among other OPEC+ members. Meanwhile, demand growth in developed markets appears to have plateaued. In summary, the likelihood of a significant upside surprise in crude demand this year—beyond gas-related growth—remains low. As a result, crude prices are expected to continue trending lower in line with underlying market fundamentals.
• Our Long-term View – The last few years have been characterized by increased geopolitical uncertainty. Going forward, we expect such events to continue to affect global trade and have a meaningful impact on effective vessel supply. Combined with the potential for a multi-year cyclical rebound in China’s economic activity following the recent economic turmoil, dry bulk shipping should experience higher volatility on top of a secular tightness driven by stable bulk commodity demand and a slower fleet growth owing to a relatively low orderbook.
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