“In 2025, we forecast a balanced development in the crude tanker market followed by a slight weakening in 2026. The product tanker market is expected to weaken during both 2025 and 2026 as deliveries from the large order book increases supply growth,” says Niels Rasmussen, Chief Shipping Analyst at BIMCO.
The unprecedented trade policy uncertainty following President Trump import tariff announcements have weakened the outlook for both the global economy and oil demand.
The International Energy Agency (IEA) now expects that oil demand will increase by 0.7 million barrels per day (mbpd) in 2025. In February, an increase of 1.1 mbpd was forecast. In 2026, demand is expected to grow by 0.8 mbpd.
“Whereas refinery throughput is forecast to grow by 0.4 mbpd in both 2025 and 2026, global oil supply is expected to grow by 1.6 mbpd in 2025 and 1.0 mbpd in 2026 as OPEC+ begins to unwinder production cuts,” says Rasmussen.
Oil supply is consequently expected to outpace demand by close to 1 mbpd during both 2025 and 2026. Therefore, oil prices are expected to be under pressure during both years, and the lower prices may help underpin demand.
The excess supply could further drive an increase in global oil inventories which may further support crude tanker demand.
Though there so far is no clear evidence of more ships transiting the Red Sea and Suez Canal, the ceasefire agreed between the US and the Houthi movement could eventually lead to normal routings.
Should that happen, we expect that crude and product tanker demand will end 1% and 3.5% lower than our forecast respectively.
Following two years of very low recycling activity, we forecast that recycling activity will rebound in 2025 to and double in 2026. Despite this, a significant recycling overhang of older ships will remain, and recycling could therefore end even higher than our forecast.
“The demand side, however, contains the most uncertainties. As cargo volumes have started the year lower than last year, rest-of-year crude and product tanker volumes must grow 2.0% and 1.0% YoY respectively for full year volumes to match our forecast. Continued US trade policy uncertainty could meantime hurt private consumption and industrial production and drive volumes lower than our forecast,” says Rasmussen.
The weak volumes year-to-date have resulted in a significant reduction in freight rates and time charter rates compared to last year. In both markets, the weakening of time charter rates began in late 2024.
So far, second-hand ship prices have not fallen in line with freight rates and time charter rates, which could indicate that the market expects a stronger market later in the year. Though newbuilding prices remain in line with last year’s year-to-date levels, it is important to note that they have fallen 4-5% since peaking in late 2024. The global order book peaked early in the year as global contracting year-todate has been more than 50% lower than last year. Should contracting across all ship sectors remain weak, we could see newbuilding prices fall further.
Overall, we forecast that the crude tanker market will see balanced supply/demand development in 2024, but that demand will grow slightly slower than supply in 2026. The product tanker market is estimated to weaken during both 2025 and 2026 as supply growth accelerates.
In both markets, year-to-date volumes have been weaker than last year, and our 2025 fullyear forecast assumes a pick-up in volumes rest of year. As trade policy uncertainty is at an all-time high, economic growth and industrial activity could end lower than currently expected and influence oil demand negatively.
On the other hand, OPEC+’s decision to begin to unwind production cuts is expected to lead to an oversupply of oil and lower oil prices. The lower prices should help support demand and could also lead importers to increase oil stocks and therefore increase shipped volumes. We have not included a possible return to normal Red Sea and Suez Canal routings in our forecast. A return to normal routings is estimated to lower ship demand by 1% for crude tankers and 3.5% for product tankers due to the lower sailing distances.
On the supply side, we are forecasting an increase in recycling. However, following low recycling activity during the past few years, a large recycling overhang exists which means that recycling could end higher than we have included in our forecast.
The weak volumes year-to-date have resulted in a significant reduction in freight rates and time charter rates compared to last year. In both markets, the weakening of time charter rates began in late 2024.
Source: BIMCO