VERY LARGE crude carrier rates have begun to decline, at least temporarily, in the wake of a surge that pushed some individual fixtures over $100,000 per day.

The Baltic Exchange’s TD3 time charter equivalent index for Middle East Gulf-China VLCC rates fell to $89,576 per day on Monday, down $5,443 per day or 6% versus Friday. The latest assessment is down 7% versus the high of $96,100 per day on September 16.

The TD15 West Africa-China VLCC TCE index came in at $83,963 per day, down 3% from the high on September 16.

The TD22 US Gulf-China VLCC TCE index was at $78,712 per day, down 5% from September 17.

The Baltic Exchange assessed global average VLCC rates at $84,084 per day on Monday, down 5% from the high of $88,082 on September 17, which was the strongest reading for this index since April 30, 2020, at the tail end of the Covid-era floating storage boom.

The global index, even with its slight retreat, remains at a level that hasn’t been seen since April 2020, with the exception of last week. In a rising spot market, rates in the volatile VLCC segment repeatedly retrench to increasingly higher lows on the way upward. 

Less chartering activity, with some fixtures failing

Much of the recent strength has been centred in the Middle East Gulf. There has been a reduction in fixing activity there in recent days.

“Chartering activity has slowed with bookings pushed forward,” said Frode Mørkedal of Clarksons Securities.

According to Gibson Shipbroking, “As [last] week progressed, enquiry began to taper off, and by week’s end, the pace had slowed noticeably.” This week, said Gibson, “we could find charterers work more under the radar, picking tonnage off to cool the market”.

Brokerage BRS said, “With charterers having reached forward, covering most of the first decade of October, they have bought a little breathing room for the list to be replenished in the coming days, and therefore, we can expect charterers to delay working their cargoes where possible to allow rates to settle slightly lower.”

Jefferies analyst Omar Nokta said, “VLCC rates are at strong levels, though expectations are for a moderate easing from current averages. FFAs [forward freight agreements] are trading at an implied TCE on the Arabian Gulf-to-China route of $90,000 per day for the remainder of September and $75,000 per day for October.”

A number of analysts and brokers have pointed out that there has been less “fixing and failing” — placing ships on subjects as a free option — during this month’s rate spike than in past runups, implying that the driver is more fundamentals than sentiment.

That said, there have been multiple VLCCs placed on subs at high rates recently that have failed to conclude their fixtures.

According to data from the Tankers International VLCC pool, fixtures have recently failed for Universal Challenger (IMO: 9851854), which had been placed on subs by ExxonMobil for a West Africa-China voyage at $99,930 per day; Monaco Loyalty (IMO: 9312511), on subs at W107.5 for a MEG-Malaysia charter for Petco Petroleum; Front Tweed (IMO: 9920784), originally slated for a US Gulf-China trip for Phillips 66 at $130,487 per day; and Zourva (IMO: 9679593), which had been put on subs by Clearlake for a US Gulf-China voyage at $127,368 per day.

Causes for caution

One reason for current rate strength could be VLCC positioning on the global map, with MEG position lists temporarily reduced.

“The current surge in rates mirrors the pattern observed in September 2022, primarily driven by a noticeable decline in the number of vessels in the Arabian Gulf,” said Signal Ocean on Monday.

“Ras Tanura has seen a consistent decrease in VLCC numbers following a peak in early July. The vessel count has now reached a year low of 85, leading to skyrocketing rates and a bullish market sentiment for the end of September.”

Another cause for caution: the outlook for Chinese imports, a key driver of VLCC demand, is muted.

Vortexa lead market analyst Emma Li recently wrote, “So far this year, China’s seaborne crude imports have averaged 10.3m barrels per day, about 3% higher than the same period in 2024. But if we strip out stock builds, adjusted imports have been consistently lower year-on-year from March to August.

“Since June, stockpiling momentum has stalled. With most new [storage] tanks only expected from late 2026 onward, there is little scope for inventories to climb much higher in the near term,” said Li.

“China’s crude stockpile growth looks set to plateau, leaving imports more closely tied to underlying demand trends, rather than storage plays, in the months ahead.”

Bull case for fourth quarter

Overall, sentiment on fourth-quarter VLCC rates remains highly bullish.

According to Xclusive Shipbrokers, “The intra-September average is now roughly $65,300 per day. Until the end of August, the year’s high was just over $60,500 per day, so this is not a gentle repricing. It’s a regime change.

“This September breakout is the strongest since the pandemic storage episode and the first time in 2025 that VLCCs have decisively retaken leadership from midsize crude segments.”

Xclusive attributed the breakout to longer voyage lengths and higher tonne-mile demand, as well as sanctions and “trade frictions” shifting more barrels toward compliant tonnage.

There is also looming upside from higher Opec+ production. Frontline chief executive Lars Barstad noted during the recent Capital Link forum in London that the much-anticipated incremental Opec+ barrels still haven’t been loaded on VLCCs.

Xclusive said, “Those volumes haven’t fully hit the water yet, but the market is already clearing the forward programme at richer numbers.

“Add refinery maintenance and the prospect of inventory builds in 4Q25 and 1Q26, and you have the preconditions for contango and, if onshore tanks fill quickly, a modest return of floating storage. It doesn’t take 2020-style storage to move the needle: even small increments absorb capacity and force charterers up the curve.”

Mørkedal explained on Monday, “Contango in this environment is more likely to deepen because of storage, rather than storage responding to contango.

“Once balances force barrels onto ships, freight becomes part of the carry cost. As tonnage is removed, the trading fleet tightens and freight rates rise, raising the cost of storage at sea. For the trade to remain economic, time spreads must widen, pushing the forward curve further into contango.”

According to Poten & Partners manager of marine research Erik Broekhuizen, “The underlying reasons for the high VLCC rates are relatively straightforward: increasing demand for ships and limited supply of available tonnage.

“The strong VLCC market is not a surprise, but what about the future? Is this sustainable? We think it is. Many of the drivers that pushed the market up so far will remain in place for a while.”