Oil tanker owners and traders are increasingly reluctant to enter long-term charter agreements due to rising geopolitical uncertainties since Donald Trump became U.S. President.
The impact of U.S. tariffs on China, the potential tariffs on Canada, Mexico, and the European Union, ongoing tensions around the Red Sea/Suez Canal, sanctions on Iran, Russia, and Venezuela, and peace talks in Ukraine have all created heightened uncertainty in both the oil and tanker markets.
Tanker owners, operators, and commodity trading groups warn that the U.S. foreign policy decisions have made the oil trade and market conditions less predictable. Any shift in trade flows, along with new sanctions or restrictions, leads to soaring freight rates and higher volatility in the tanker market.
Challenges for Long-Term Charter Deals
In this environment of increased uncertainty, time-charter deals – which offer fixed hire rates for a specific period – have become harder to secure. According to Mikael Skov, CEO of Hafnia, one of the largest tanker operators globally, “It’s more difficult now to do long-term deals.” While these agreements offer security with fixed rates, few oil traders are willing to commit to them amid such volatility.
Trump’s erratic policies, including tariffs, sanctions on Iran, Venezuela, and Russia, and involvement in conflicts like Gaza and Ukraine, continue to cloud the market outlook for 2025. Despite some improvements in security around Yemen and the Red Sea, tanker traffic in the region remains low. Many major shipping companies still prefer the longer route via the Cape of Good Hope to avoid risks in the Middle East. These uncertainties are compounded by limited tanker availability, especially for carrying Russian oil, after sanctions from the Biden administration.
Cautious Outlook from Tanker Operators
Earlier this month, several tanker operators and owners expressed concern over the outlook for 2025 due to the unpredictable nature of U.S. policies. Denmark’s Norden, a major tanker and dry-bulk vessel operator, warned in its annual report that geopolitical tensions in Ukraine and the Middle East would likely continue to affect market conditions.
Klaus Nyborg, Chairman, and CEO Jan Rindbo emphasized that sanctions and trade wars could add even more volatility to the tanker market. Norden expects weaker tanker rates in 2025, which will likely result in lower profits compared to the previous year. They forecast net profits for 2025 to range between $20 million and $100 million.
Teekay Tankers, listed on the NYSE, also highlighted the range of potential outcomes due to current global issues, including security concerns and the war in Ukraine. While the fundamentals for tanker market growth appear supportive, they noted that sanctions on Iran and tariffs could significantly impact the market in the short term.
Teekay noted that tougher sanctions on Iranian crude oil exports might prompt China to seek oil from other sources, which could boost tanker demand. Additionally, potential U.S. tariffs on Canadian and Mexican oil could shift more shipments to Asia and increase demand for tankers.
Long-Term Optimism Despite Short-Term Uncertainty
Despite the current uncertainties, tanker operators remain optimistic about the long-term prospects of the market. The aging fleet and limited shipyard capacity are expected to support the market in the coming years.
Teekay’s President and CEO Kenneth Hvid commented that oil demand is expected to grow, along with tonne-mile demand as oil production increases in the Atlantic and refineries expand in Asia. On the supply side, the global tanker fleet is aging, and the number of new ships ordered is low compared to the number of vessels reaching 20 years of age, suggesting limited fleet growth in the medium term.
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