After some VLCC earnings exceeded $1 million per day in October, the market is now experiencing a sharp correction. Lower Atlantic crude shipments, competition from smaller tankers and improving vessel availability are putting pressure on rates, although geopolitical risks continue to support parts of the market.

The VLCC spot market has entered a sharp correction, with average earnings falling 31.2% in one week to $531,000 per day on 13 November, according to the Baltic Exchange. This is the lowest level since 10 September.

The decline marks a significant reversal from October, when geopolitical disruption around the Strait of Hormuz, longer voyage times and restricted vessel availability pushed some VLCC earnings above $1 million per day.

Recent fixtures suggest that charterers are regaining negotiating power, but the correction is developing unevenly across trading regions.

Fixtures reveal the scale of the correction

Two recent fixtures illustrate how quickly the market has changed.

Vitol fixed Frontline's 319,000-dwt Front Nausta (built 2019) for a Middle East-to-China voyage at Worldscale 310. Tankers International estimates earnings of approximately $374,000 per day on the laden leg, equivalent to around $310,000 per day on a round-voyage basis.

Unipec, the trading arm of China's Sinopec, fixed Angelicoussis Group's 300,000-dwt Maran Mira (built 2020) for a West Africa-to-China voyage at WS 290. The fixture represents approximately $269,000 per day, or $281,000 per day on a round-voyage basis.

The contrast with the previous week is substantial. A similar West Africa-to-China voyage fixed on 6 November at WS 500 generated estimated round-voyage earnings of approximately $491,000 per day.

High freight rates have started suppressing VLCC demand

One important driver of the correction is that exceptionally high transportation costs have begun changing charterers' purchasing and shipping decisions.

During October, expensive VLCC freight made some long-haul crude movements from the Atlantic Basin to Asia less commercially attractive.

Kpler data showed that combined VLCC crude exports from the US Gulf Coast, Latin America and West Africa to Asia declined from approximately 4.5 million barrels per day in September to 3.1 million barrels per day in October.

Smaller tankers also gained market share. Suezmax vessels accounted for approximately 80% of West African exports, compared with a historical average of around 50%.

This demonstrates how elevated VLCC freight can undermine its own demand. When transportation costs become excessive, charterers have an incentive to divide cargoes among smaller vessels where commercially viable.

As freight rates retreat, however, Atlantic crude transportation becomes more competitive again, potentially supporting future VLCC demand.

Vessel availability is gradually improving

The other major factor is the changing balance between available tonnage and cargo demand.

During the Middle East disruption, many VLCCs were absorbed into longer voyages, shuttle operations and ship-to-ship transfer arrangements. Kpler estimated that more than 95 VLCCs were involved in shuttle operations, reducing the effective availability of conventional trading tonnage.

As vessels complete these operations and return to regular trading patterns, more capacity becomes available for new employment.

The redistribution of ballast vessels is another indicator. Signal Maritime recorded 49 westbound VLCC ballasters on 8 November, compared with 45 a week earlier, pointing to a gradual movement of tonnage towards the Atlantic.

Even a relatively modest increase in available ships can put significant pressure on rates when chartering demand is simultaneously weakening.

Geopolitical risks remain a market variable

Despite the correction, the geopolitical premium has not disappeared.

The Middle East market remains more exposed to security risks around the Strait of Hormuz, while Atlantic routes have experienced a more pronounced decline.

This regional divergence is important. A reduction in freight rates does not necessarily mean that the underlying security situation has normalised. Rather, the market is adjusting to changing vessel availability, chartering activity and expectations about future disruption.

Any renewed escalation could quickly tighten effective supply again, particularly for voyages involving the Middle East Gulf.

Newbuilding supply adds a longer-term concern

Beyond the immediate spot market, the expanding VLCC orderbook presents another challenge for owners.

Veson Nautical estimated in September that the VLCC orderbook had reached approximately 38% of the existing fleet, compared with around 15% a year earlier.

S&P Global Energy CERA has also projected substantial growth in global VLCC capacity through 2029, with deliveries concentrated towards the latter part of the decade.

Although these ships will not immediately affect today's spot market, they raise questions about whether future growth in crude trade and transportation distances will be sufficient to absorb additional capacity.

For now, the market's direction will depend primarily on three variables: security conditions around Hormuz, Asian demand for Atlantic crude and the number of vessels returning to conventional trading.

Okeanis Eco Tankers chief executive Aristidis Alafouzos has acknowledged the correction but expects the market to rebound deeper into the fourth quarter.

The latest decline does not necessarily signal the end of the VLCC cycle. However, it demonstrates how quickly earnings can retreat when exceptional geopolitical premiums and restricted vessel availability begin to ease. After October's extraordinary rates, the market is now facing a more demanding test of underlying supply and demand.