Vessel owners and oil traders are hesitant to enter long-term charter deals for oil tankers amid heightened geopolitical uncertainty since U.S. President Donald Trump took office.
The U.S. tariffs on China, the threat of tariffs on Canada, Mexico, and the European Union, the still uncertain security situation around the Red Sea/Suez Canal route, sanctions on Iran, Russia, and Venezuela, and the talks on peace in Ukraine have increased uncertainties in the oil and the tanker markets.
Tanker owners and operators and commodity trading groups have highlighted the greater uncertainty the oil trade flows and markets face with the foreign policy choices of the United States. Any change to trade flows and new sanctions and restrictions lead to spiking freight rates and raise volatility in the tanker market.
“More Difficult Now to Do Long-Term Deals”
In this situation of greater uncertainty, time-charter deals – which give more certainty due to the fixed hire rates for a fixed period of time – have been more difficult to make, shipowners and shipbrokers tell the Financial Times.
“Oil traders, other shipowners — everybody’s kind of having the same view that it’s probably more difficult now to do long-term deals,” Mikael Skov, CEO at Hafnia, one of the biggest tanker operators worldwide, told FT.
While time-charter deals give oil traders security that they would pay a fixed rate to use a tanker for a certain period of time, few are willing to commit to such longer-term deals now.
President Trump’s unpredictable policies, from tariffs on trade partners to sanctions on Iran, Venezuela, and Russia, and his push for intervention in the conflicts in Gaza and Ukraine are clouding the outlook for 2025, tanker operators and owners say.
Moreover, despite the improved security situation around Yemen and the Red Sea, tanker traffic in the area remains subdued. The world’s top shipping firms continue to prefer the longer route via the Cape of Good Hope in Africa to avoid skirmishes in Middle Eastern waters.
All these uncertainties piled on top of the severely shrunk availability of tankers to carry Russian oil after the Biden administration’s farewell sanctions on Russia’s oil trade and its shadow fleet.
Cautious Tanker Operators
Earlier this month, tanker operators and owners flagged several key uncertainties for 2025 stemming from the unpredictable U.S. policies.
Denmark’s Norden, operator of tankers and dry-bulk vessels, said in its annual report for 2024 that “Entering 2025, macroeconomics and the geopolitical situation in Ukraine and the Middle East, are still expected to impact the market outlook.”
“In addition, potential disruptions from sanctions and trade wars are adding to even higher uncertainty and volatility compared to 2024,” Klaus Nyborg, Chair of the Board of Directors, and CEO Jan Rindbo, said.
In Freight Services and Trading, Norden expects the margins in the dry cargo activities to continue to improve, but margins in the tanker activities “are likely to decline as a result of weaker tanker rates.”
Norden expects lower profits this year compared to 2024, based on the current market outlook and also as a result of lower sales gains from already signed transactions. The company guides for a full-year 2025 net profit in the wide range of $20 million to $100 million.
NYSE-listed Teekay Tankers last week highlighted “the wide range of potential outcomes from the various current issues impacting global trade, security, and energy.”
Underlying tanker market fundamentals continue to appear supportive for 2025 growth, Teekay Tankers said, but noted that Iranian sanctions, the war in Ukraine, the return of Red Sea transits, and the impact of tariffs will likely have an impact on the direction of the tanker market in the near term.
“Tougher sanctions on Iranian crude oil exports could lead China to import oil from other sources via the compliant fleet, which would be positive for tanker demand,” Teekay Tankers noted, commenting on the impact of President Trump’s ‘maximum pressure campaign’ on the Islamic Republic.
Moreover, “the imposition of any tariffs on U.S. imports of Canadian and Mexican oil could lead to an increase in U.S. seaborne imports from other sources while also pushing more Canadian and Mexican oil to Asia, both of which could be positive for tanker tonne-mile demand,” Teekay Tankers said.
Future tariffs by the U.S. on other countries or economic blocs could also affect seaborne oil trade patterns and the tanker market, the company noted.
Positive Long-Term Fundamentals Remain
While tanker operators and owners flag near-term uncertainties, they continue to be optimistic about the long-term fundamentals for the tanker market—aging fleets and limited available shipyard capacity.
“We continue to see positive underlying tanker fundamentals supporting our segments. Oil demand is expected to increase, and tonne-mile demand is expected to grow as oil production increases disproportionately in the Atlantic and refineries continue to expand primarily in Asia,” Teekay Tankers’ president and CEO Kenneth Hvid said in comments to the Q4 results.
“On the supply side, the global tanker fleet is older than it has been in decades, and the number of vessels currently on order relative to the number of ships reaching age 20 during the same timeframe, suggests low tanker fleet growth over the medium term.”
