THE traditional winter upswing in product tankers comes later this month, but for crude tankers it should have already begun. It hasn’t.

The very large crude carrier market “remains under pressure, with no strength seen in either basin”, said Clarksons Securities analyst Frode Mørkedal.

Clarksons puts average non-eco VLCC rates at $29,600 per day on Tuesday, down 31% month on month (m/m); suezmax rates at $40,000 per day, down 6% m/m and aframax rates at $31,500 per day, down 25% m/m.

In most years, crude tanker rates rise throughout the month of October. The Baltic Exchange TD3 VLCC index, which measures spot rates from the Middle East to China, showed significant gains at this time of year in 2016, 2017, 2018, 2022 and 2023 (2019 was anomalous due US sanctions on Cosco, and 2020-2021 were anomalous due to Covid).

The TD3 index increased by 15% to 64% in these five years between October 1 and November 5.

Not so in 2024, when the TD3 index has declined 6% over the same period. The TD3 fell to Worldscale 50 on Tuesday, back to levels seen in early September, at the tail end of the seasonal summer trough.

“Crude tanker rates have improved from their 3Q seasonal lows, but have yet to see seasonal strength,” said Jefferies analyst Omar Nokta. “Unless rates improve… there are likely to be 4Q estimate revisions downward.”

Breakwave Advisors, which administers the BWET crude-tanker exchange-traded fund, said on Tuesday, “The VLCC market is experiencing an unusual downturn for this time of year, marked by low activity and a persistent drop in rates across both eastern and western markets. Limited demand and high vessel availability continue to exert downward pressure on freight rates.”

The BWET exchange-traded fund, which purchases near-dated freight futures to mirror crude-tanker (primarily VLCC) spot rates, is down 23% year to date, sinking to a new 52-week low on Tuesday.

“Operating expenses now provide a near floor, preventing rates from dropping even further. With position lists at their highest level of the year, owners face one of the toughest rate environments in recent memory,” said Breakwave.

It said that there are “reports that Chinese charterers increasingly favour domestic vessels”, which is “diminishing chances of a near-term rebound”.

“This shift in preference by Chinese charterers has reduced options for international owners, adding opacity to rate-setting as large oil traders wield greater influence.”

Commenting on the VLCC market over the past week, brokerage BRS said the Middle East Gulf market faced “limited fresh demand on the surface and insufficient cargoes to prevent the tonnage list from being resupplied. With fundamentals still in charterers’ favour, the declines appear likely to continue, albeit slowly”.

In the West Africa VLCC market, BRS said “fundamentals are not supportive of a recovery in the short term”. In the US Gulf, it said “the overhang of tonnage going into December is significant and signs of any imminent recovery are unlikely”.

The surprise weakness in the crude tanker business coincides with an expensive bet by product tanker owner Scorpio Tankers that crude tanker rates would increase.

Scorpio announced on October 29 that it had purchased 7,982,480 shares of VLCC owner DHT for $89.1m. This equates to an average price of $11.16 per share. As of Tuesday, DHT was trading at $10.04 per share, meaning that Scorpio’s new crude-tanker bet is already down 10%, equating to a paper loss to date of $9m.