Is the Tanker Market Overly Growing?
The tanker market has experienced a boom in recent months, driven by a combination of factors. Increased sanctions (and their enforcement) continued strong oil demand (partly driven by China’s growing reserves), and OPEC+ production increases have created an unprecedented tariff environment since the initial surge in freight rates following the pandemic.
Slower fleet supply growth in 2024 and 2025 has also played a role. This improved supply-demand balance makes the shipping market more susceptible to small fluctuations in demand per tonne per mile. Strong cash flow in the current shipping market has boosted shipowner confidence, prompting them to consider fleet expansion and renewal.
In this tanker market analysis, we will review current order trends and compare them to historical performance. Our goal is to determine whether current order trends warrant the attention of shipowners.
Moderate tanker order volumes in 2021 and 2022 have led to lower deliveries in 2024 and 2025. Following Russia’s invasion of Ukraine, demand for tankers accelerated, particularly for Aframax/LR2 and Suezmax tankers, which benefited most from Russia’s aggression. Shipowners sold older vessels to “dark fleets” at increasingly higher prices and reinvested some of the proceeds into new orders.
In 2024, Very Large Crude Carriers (VLCCs) also joined this trend, with new orders doubling compared to the previous year. Orders so far in 2025 are lower than in 2024, but despite the slower growth, the total backlog of orders for the next three to five years is still significantly larger. Currently, the total tanker order backlog represents 16% of the existing fleet, a robust double-digit figure. Recent industry headlines indicate that orders are increasing, especially for VLCCs.
Tanker demand is cyclical and highly dependent on current cash flow and shipowners’ confidence in future market conditions. However, the tanker market has historically been unpredictable, and investing millions of dollars in assets that may not be profitable for several years always requires considerable confidence.
One significant advantage of building new ships is that shipyards offer installment payment plans, enabling shipowners to pay over time. Typically, only a 10% to 20% down payment is required. High freight rates, especially for Very Large Crude Carriers (VLCCs), convince some shipowners that purchasing a new ship might be a worthwhile investment.
Another frequently mentioned factor is the age of the existing fleet. The reduction in the recycling (scrapping) of older tankers has led to a gradual increase in the average age of the fleet, suggesting that these vessels will eventually be decommissioned. However, many of these older vessels belong to an illicit fleet used for lucrative legal commercial operations. Even after sanctions are lifted, only a portion of these vessels will be recycled, and the timing of sanctions lifting is highly uncertain.
As mentioned earlier, current tanker orders (by 2025) represent 15% of the total fleet, a relatively high proportion, but not unprecedented (see Figure 1). Similar levels of orders were reached in 1991 and 1992 as the global tanker fleet began transitioning from single-hull to double-hull vessels. Due to the need to replace the entire global tanker fleet, order volumes remained high for a considerable period (approximately 10 years). An exceptional surge in orders occurred between 2001 and 2009.
During this “supercycle,” the shipping market benefited from China’s rapid economic growth. Between 2007 and 2009, tanker orders accounted for over 40% of the total fleet. However, the global financial crisis triggered a market collapse. It took the tanker market several years to absorb the excess supply.
OPEC’s prominent order placements primarily drove the recent surge in oil orders in 2015 and 2016 to maintain market share. Increased seaborne oil volumes facilitated the use of tankers as floating storage facilities, further pushing up oil prices. Some similar short-term drivers also influence the current tanker boom, although the geopolitical environment has changed dramatically. However, it’s important to note that long-term oil demand growth is limited, and the increasing demand for shipping distances cannot keep pace with excessive fleet expansion. Therefore, shipowners should keep this in mind when considering ordering new vessels.
