Introduction
The commercial oil tanker market has spent the past several years reshaped less by the absolute number of barrels moving at sea than by how far those barrels travel, which ships are allowed to carry them, and whether owners still make money keeping ageing tonnage in service. From the post-pandemic rebound of 2022–2023 through the freight spike of late 2025 and into the delivery wave now building for 2027–2029, the story is one of tightening, then late-cycle ordering, with recycling still too weak to offset new supply.
This article sets out that arc: what demand and supply looked like about three years ago, where the market stands now, what “rates” mean for scrap decisions, and how the next few years may unfold.
About three years ago: recovery and longer routes
In 2022 and 2023, oil tankers were still climbing out of the Covid shock. Global mobility and oil demand returned, but the decisive change was geopolitical. Russia’s invasion of Ukraine, followed by sanctions and price caps, forced a large share of Russian crude and products onto longer routes to Asia. At the same time, Atlantic Basin producers — the United States, Brazil, Guyana, and others — expanded exports toward Asian buyers. For tanker owners, that combination mattered more than headline oil-demand growth alone: tonne-miles (cargo volume multiplied by distance) rose even when cargo counts were only moderately higher.
In the very large crude carrier (VLCC) segment, Tankers International reported that spot liftings rose by about 19% in 2022 versus 2021, with vessel-days employed up roughly 7%. In 2023, VLCC liftings and tonne-miles each grew by about 6%, helped by west-to-east flows as US crude exports set new records and South American barrels filled Asian demand. Mid-size crude ships — Suezmax and Aframax — often recovered earlier than VLCCs, because they were better suited to the first wave of rerouted Russian and regional trades.
On the supply side, the fleet was growing slowly. Industry outlooks around mid-2022 pointed to VLCC net fleet growth near 3% in 2022 and closer to 1% in 2023, with the broader large crude fleet slowing toward roughly flat growth. The orderbook was thin by historical standards; for a time the VLCC orderbook sat below about 5% of the trading fleet. That scarcity of new ships, set against rising tonne-mile demand, was the foundation for the firmer market that followed.
A parallel development was the rise of the so-called shadow fleet: older tankers drawn into sanctioned oil trades for Russia, Iran, and Venezuela. Those ships largely left the mainstream, compliant market. Headline fleet statistics therefore began to overstate the tonnage truly available to oil majors and Western charterers.
The current market: high utilisation, high earnings, ageing steel
By late 2025 and into 2026, those structural forces had matured into a distinctly bullish freight environment. DNV described tanker freight rates more than 60% above the ten-year average by late 2025, with VLCC earnings peaking above $100,000 per day and vessel utilisation above 90%. Tankers International characterised 2025 as one of the strongest VLCC years in a decade, driven by more crude and condensate on the water, longer voyages, and a rebound in global oil supply of roughly 2.8 million barrels per day as OPEC+ restored output and non-OPEC producers in the Americas kept growing.
Oil demand growth itself remained only moderate — on the order of about one million barrels per day in both 2025 and 2026 on EIA-type estimates. Geography did the rest. Incremental consumption and refining demand stayed concentrated in Asia, while much of the new supply emerged west of Suez. China, in particular, lifted seaborne crude imports toward around 12 million barrels per day in late 2025, versus levels often below 10 million barrels per day for much of 2024, with strategic stockbuilding adding to the pull.
Fleet growth looked manageable on paper. Allied data around early 2026 put the global tanker fleet above 25,000 deadweight tonnes at roughly 6,136 ships and 676 million dwt. Net capacity growth in 2025 was only about 2%, or some 13 million dwt, after deliveries of about 18.5 million dwt and removals near 5.4 million dwt. VLCCs barely expanded in net terms; Aframax/LR and MR product tankers absorbed more of the growth.
The more important supply story was effective supply. Sanctions and opaque trading had parked a large share of older VLCCs outside normal commerce — on some estimates around 200 VLCCs linked to sanctioned trades, removing on the order of one-fifth or more of the VLCC fleet from the mainstream pool. AXSMarine has similarly estimated that roughly 23% of the largest tanker segments are tied to shadow activity. The compliant fleet is therefore smaller, older, and less flexible than a simple fleet count suggests.
Ageing is now a structural feature. DNV reported that by end-2025, 23% of all tankers were over 20 years old and 45% were 15 or older, up from 36% a decade earlier. In crude trades, about 40% of VLCCs and Suezmaxes were older than 15 years; for Aframaxes the share exceeded 45%. Charterers have stretched traditional age caps in tight markets, but oil majors remain stricter than traders — a split that keeps older ships employed in some trades while excluding them from others.
Segment performance has also diverged. VLCCs led the late-2025 spike; early 2026 saw more volatility in that class as shadow-fleet employment shifted, while Aframax and Suezmax earnings often led on Atlantic, European, and regional dirty trades. Product tanker supply, meanwhile, has been expanding faster than crude, setting up a weaker medium-term balance for clean ships than for large crude carriers.
What “rates” mean — and why recycling stays low
When market commentary says recycling is too low because “rates” are high, it is not referring to interest rates. In shipping, rates mean freight earnings: the money an owner receives for carrying cargo. That is commonly quoted as a voyage freight rate (for example on a Worldscale basis for a Middle East–Asia VLCC) or converted into time-charter equivalent (TCE) — dollars per day after voyage costs such as bunkers and port charges.
Those earnings determine whether an old ship lives or dies. An owner of a 20- to 25-year-old tanker faces a simple choice. Keep trading, and the ship must cover crew, insurance, maintenance, fuel, and still leave a margin. Sell for scrap, and the owner receives a one-time payment based largely on steel weight, then exits the market.
When TCE earnings are elevated — as they were when VLCC returns briefly exceeded $100,000 a day — even inefficient, fuel-hungry ships can clear a profit. Secondhand values tell the same story. Breakwave Advisors, citing Allied QuantumSea research for the first half of 2026, noted twenty-year-old VLCC values around $71 million against scrap values near $21 million. As long as that gap remains wide, demolition is economically irrational for most owners. Recycling therefore stays low, older ships remain in the water, and fleet supply does not shrink the way a simple delivery schedule might imply.
A scrap wave — a concentrated period of demolitions — becomes more likely when freight earnings ease. If TCE rates fall toward or below the operating costs of inefficient ships, those vessels struggle to find employment, especially with quality-sensitive charterers. At that point, scrap becomes the cleaner exit. Many brokers and analysts expect that moment to arrive more forcefully from late 2027 onward if the current orderbook delivers into a softer freight market.
Regulation can hasten the same outcome. The International Maritime Organization’s Carbon Intensity Indicator (CII) scores ships on carbon dioxide emitted relative to cargo-carrying work. Older, less efficient tankers score worse, face higher compliance costs, and become harder to charter, insure, and finance as rules and customer expectations tighten. CII does not scrap ships by itself, but it tilts the economics against the oldest tonnage once earnings are no longer rich enough to override inefficiency.
The forward view: balanced near term, heavier supply later
The near-term crude tanker balance still looks workable if tonne-mile inefficiencies persist. BIMCO’s late-2025 and early-2026 outlooks generally framed 2026 crude demand growth in a roughly 1–2.5% range, with supply growth near 1.5–2% — close to balanced — while warning that product tankers face faster fleet growth of about 5.5–6.5% against demand closer to 0–1.5%. AXSMarine’s earlier segment scenarios were blunter on mid-size risk: VLCC capacity growth of only about 2% in 2026, versus Suezmax near 5% and Aframax/LR above 10%, leaving Aframaxes most exposed to oversupply if demand does not keep up.
Deliveries are the hinge. IF Chor Galbraiths estimated around 49 million dwt of tanker deliveries scheduled for 2026, with crude tankers near 24 million dwt this year and about 30 million dwt in each of 2027 and 2028. Ordering has already responded to strong earnings. Clarksons figures reported via Splash247 put the VLCC orderbook at a record scale — on the order of 262 ships, around 30% of the existing fleet — after a burst of contracting that recalled the late-2000s boom. Allied data for mid-2026 showed the broader tanker orderbook rising to roughly a quarter of fleet capacity. Braemar and others have argued that recycling of older ships could still keep net fleet growth manageable, but only if earnings eventually weaken enough to force a clear-out; Breakwave has been more cautious, warning of a meaningful negative supply–demand balance further out.
Geopolitics remains the wild card. Sanctions, Red Sea diversions, and disruptions around key chokepoints can tighten effective vessel supply even when cargo volumes soften, because ships spend more days on longer routes, waiting, or stuck in inefficient trades. Conversely, any durable normalisation of routes or broad sanctions relief would shorten voyages, free up ships, and amplify the impact of new deliveries. That is why the consensus tone for 2026 is still constructive for crude, while 2027–2029 is where oversupply risk concentrates — especially if the scrap wave arrives later than the ships do.
Conclusion
Commercial oil tanker markets over the past three years have been defined by moderate oil-demand growth, outsized tonne-mile demand, and a mainstream fleet thinned by sanctions and age. High freight rates rewarded that tightness and, paradoxically, delayed the natural corrective mechanism of recycling: as long as old ships earn strong dollars per day, they stay in service. The next phase of the cycle will be decided by whether the record orderbook lands into continued disruption and resilient Asian pull — or into shorter routes, softer TCE earnings, and a regulatory squeeze on inefficient tonnage. If rates ease and CII-type rules bite, the scrapyards may finally do what strong markets would not: remove steel from a fleet that has grown older while it grew richer.
Sources
Tankers International, 2022 in review: the year of the VLCC market recovery (Jan 2023); How 2023 became the year of VLCCs (Jan 2024); 2025 market review and outlook for 2026 (Jan 2026).
DNV, Bullish outlook for tanker market amid global uncertainties.
BIMCO, Tanker Shipping Market Overview & Outlook (including late-2025 / 2026–2027 forecasts reported via Hellenic Shipping News, gCaptain, and SAFETY4SEA).
AXSMarine, Tanker Market Supply Scenarios for 2025 and 2026.
Allied / Cyprus Shipping News weekly market report (fleet and 2025 delivery–removal figures, early 2026).
ISL, reported via SAFETY4SEA, Total oil tanker fleet showed increase at the start of 2026.
IF Chor Galbraiths, Tanker fleet deliveries rise as crude oil tankers dominate (Feb 2026).
Clarksons Research figures via Splash247, VLCC orderbook hits record high; Braemar comments therein.
Breakwave Advisors / Allied QuantumSea, Tanker 1H 2026: Strong VLCC Earnings Drive Newbuilding and Secondhand Investment (Sep 2026).
Kpler, Q1 2026 Tanker Market Outlook; Veson Nautical, Shipping Market Outlook: Q3 2026.
International Maritime Organization (IMO), Carbon Intensity Indicator (CII) framework.