Middle East tanker spree stokes VLCC glut fears as 2028–2029 deliveries loom

The Middle East conflict has triggered a surge in demand for very large crude carriers (VLCC), leading to concerns about a potential tanker market glut. In the first half of 2024, 177 VLCCs were contracted for new construction worldwide, with a total deadweight tonnage (DWT) of 54.5 million DWT, surpassing the previous record set in 2006.

The construction price for these massive tankers, which can carry approximately 2 million barrels of oil each, has exceeded $130 million per ship, marking the most expensive level since 2008.

The surge in VLCC orders is attributed to Middle Eastern oil-producing countries attempting to secure their own vessels due to disrupted operations in the Strait of Hormuz. This move aims to ensure the continued export of crude oil despite the ongoing war. However, this boom in VLCC ordering raises concerns about a future supply glut when these vessels are delivered in 2028-2029, as it could lead to oversupply and decreased vessel profitability.

Currently, the VLCC order backlog exceeds 310 ships, with 60 scheduled for delivery in 2027, 127 in 2028, and 125 in 2029 and beyond. This ratio of orders on hand to the currently operating VLCC fleet has surged to 35%, indicating a potential imbalance in the market. Shipping experts suggest that this boom, while slightly better than the 2004-2008 boom, could still have negative consequences for the tanker industry if it continues unchecked.