ONE charterer rules them all in the spot crude shipping business: China’s Unipec.

Over the past half-decade, Unipec lifted four to five times the spot crude volumes of its closest rival and accounted for around one-sixth of all reported spot dirty tanker volumes in the world, according to data from Poten & Partners.

Unipec, a subsidiary of China’s state-controlled energy giant Sinopec, is particularly important to spot rates in the very large crude carrier trade; it booked 369 VLCC fixtures in 1H24, compared to 53 in other segments.

And not surprisingly, as Unipec goes, so goes the VLCC spot rate market.

VLCC rates have generally underperformed suezmax and aframax rates over the past two and a half years, as mid-sized tankers have benefited from geopolitical disruptions much more so than VLCCs.

According to Poten data, Unipec spot charters accounted for 99.2m tonnes of dirty cargoes in 1H24, down 8.7% year on year. In contrast, the total volumes of reported crude spot business, at 638.4m tonnes, were up 4.3% year on year.

Crude tanker spot volumes since 2019

The general trend in Poten’s reported spot data over the past five years: Volumes peaked prior to Covid, sank during the pandemic and have been recovering ever since.

They’re still not back to where they were in 2019, although there’s a caveat. “Fixtures related to Russian trades are usually not reported in the market but represent substantial volumes,” noted Poten.

In other words, since the Ukraine-Russia war and the advent of the shadow fleet, actual volumes are higher than reported volumes. Case in point: Russia’s Lukoil ranked as high as 11th in Poten’s list of top crude tanker charterers through the second half of 2021, fell to 20th in 1H22, then vanished thereafter.

That said, it is the reported fixtures — and the rates that were paid for them — that matter to the publicly listed tanker companies in the VLCC, suezmax and aframax trades.

According to Poten’s data, reported dirty tanker fixture volumes peaked at 705.5m tonnes in 2H19. Spot VLCC rates briefly spiked to nearly $300,000 per day during this period due to Mideast unrest, according to Clarksons Securities.

Crude fixture volume then bottomed out at 539.1m tonnes in 2H20 amid the pandemic, a period when tanker owners were bleeding cash.

Volumes in 1H24 (which exclude significant Russian volumes, primarily on suezmaxes and aframaxes) were 9.5% below the 2H19 peak and 2.3% below the same period in 2019, but 18.4% above the 2H20 nadir.

Shifts among the top 10 spot charterers

The top 10 spot charterers are comprised on national oil companies, independent oil companies, and one trader, Vitol.

Poten’s data on Unipec’s spot volumes highlights the underperformance of VLCCs versus suezmaxes and aframaxes in recent years. Unipec’s reported volume trends diverge sharply from the global trends, hitting a low in 2H23 and rebounding only marginally in the latest semester.

The number-two slot has usually been filled by ExxonMobil or Shell but was taken by California’s Chevron in 1H24. Chevron has made huge strides: it was ranked seventh five years ago, in 1H19, and eighth in 2H19.

Chevron rose through the ranks by focusing on suezmax and aframax spot business. It topped the list in both vessel segments in 1H24, according to Poten. Chevron ranked sixth on the 1H24 VLCC spot fixture volume list.

Shell came in third globally in the most recent semester. Its reported spot fixture volumes have remained generally stable over the last three years. Shell was the number-two suezmax charterer and number-three VLCC charterer in 1H24.

‘Jury is still out’ on VLCC rates

According to Clarksons Securities, average spot rates for non-eco-design VLCCs were at $27,400 per day on Monday, compared to far higher average rates of $43,700 per day for suezmaxes and $40,900 per day for aframaxes.

The tanker market has favoured suezmaxes and aframaxes over VLCCs, but hope springs eternal for executives of listed VLCC owners.

“This has been a kind of atypical earnings relationship period, benefitting some of the other guys on the panel,” said Lars Barstad, CEO of VLCC owner of Frontline, during the Marine Money Week event on June 25. (The other guys on the panel owned mid-sized tankers and product tankers.)

“We at Frontline still believe in economies of scale. We still believe that, at the end of the day, the biggest ships [VLCCs] will prevail. I must admit that for the last couple of years, that has not been the case at all. We have seen the smaller- and medium-size asset classes prevailing, primarily fuelled by the conflict between Russia and Ukraine. I think that has kind of changed the logic of the market a bit.

“But we believe we’re still in the first innings of this. Maybe the jury is still out, and the VLCCs don’t initially look like the sexiest market right now, but we believe they’re going to prevail, and that this cycle has a lot of similarities to what we saw in 2002-2008, although it’s supply-driven this time, rather than demand-driven.”

Asked whether VLCCs will rebound in the second half of this year, Barstad replied, “I’m scared of putting too much expectation on the second half, because exactly one year ago, I was sitting here and I had a lot of expectation for the second half and it didn’t materialise.

“Listening to the experts now, they say oil demand will increase by close to 3m barrels and that’s going to tighten things up. So, potentially [the second half will be strong]. But where we’re sitting today is that we’re north of cash breakeven for all asset classes and we’re making good money, but we’re entering the summer lull.”