The global Tanker market is entering a critical phase, with significant developments expected for its largest segments—VLCCs, Suezmaxes, and Aframax/LRs. Fleet expansion, particularly within the Aframax/LR category, is poised to accelerate sharply, while the uncertain future of the Shadow fleet adds further complexity to the landscape.
Fleet Growth Set to Accelerate
Across Tanker segments, fleet growth is expected to vary significantly through 2025 and 2026. VLCCs will see modest expansion, with capacity increasing by just 0.4% in 2025 and 2.1% in 2026. Growth in the Suezmax segment will be faster, projected at 4% in 2025 and 5% in 2026, reflecting the robust order book. However, it is the Aframax/LR segment that stands out, with expected growth rates of 9.4% in 2025 and 11.3% in 2026.
This surge in Aframax/LR fleet size will likely outpace demand growth, especially in 2026 when deliveries are expected to peak. The segment's versatility—serving both Crude and Product trades—has made it a preferred option for new orders. However, the rapid expansion could lead to an oversupply, as 80% of the current global order book is slated for delivery after 2026. These dynamics could create long-term market challenges.
Scrapping activity is unlikely to offset this growth significantly. Most tankers currently in operation remain profitable, and recycling rates are expected to stay low until freight rates potentially weaken in late 2026. While measures such as slow steaming—designed to reduce available capacity—could offer some relief, their widespread adoption will depend on prevailing market conditions and fuel costs.
The Shadow Fleet: A Market Wildcard
The shadow fleet — vessels engaged in sanctioned trades or operating under opaque conditions — remains a crucial factor in Tanker supply dynamics. Currently, 23% of the Tankers in the largest segments (VLCC, Suezmax, and Aframax/LR2) are considered tied to these illicit activities. The shadow fleet has two key implications for the market.
First, it contributes to inefficiencies by extending voyage distances, particularly for Russian Crude Oil shipments to Asia. Many of these trades are conducted via ship-to-ship (STS) operations, which further occupies vessels and reduces the available supply at key loading hubs. This creates a scenario where, for a given level of demand, limited supply leads to higher freight rates.
Second, the potential reintegration of the shadow fleet into mainstream trades, should sanctions be lifted, could flood the market with additional capacity. While many of these vessels are aging and may face operational or regulatory challenges, their continued deployment remains essential as long as sanctions persist. Notably, the average age of Tankers in the VLCC, Suezmax, and Aframax/LR2 segments exceeds 19 years, signalling that many vessels have reached or are nearing the end of their operational lifespan.
2025: Navigating a Delicate Balance
In 2025, the Tanker market will face a delicate balancing act. Modest fleet growth in the VLCC and Suezmax segments should align reasonably well with expected demand increases of 2.5% to 3.5%. These segments are also supported by ton-mile demand, driven by long-haul routes and geopolitical inefficiencies.
The Aframax/LR segment, however, will feel the pressure of its rapid fleet expansion. With growth exceeding 9%, the market will struggle to absorb this new capacity unless scrapping, or demand growth, accelerate. Aframax/LRs are particularly exposed to oversupply risks because of their widespread use in regional and medium-haul trades, which offer fewer opportunities for ton-mile growth compared to VLCCs or Suezmaxes.
Sanctions on Iranian oil are likely to persist, continuing to generate inefficiencies that help absorb excess capacity in the tanker market. Geopolitical uncertainty remains a critical factor, with minor changes — such as increased scrapping rates or tighter sanctions — having the potential to significantly impact market dynamics.
In contrast, sanctions on Russian oil could be lifted under a hypothetical scenario. If EU sanctions on Russian Crude are removed, trade flows are expected to undergo key transformations. Russian Crude exports to Europe would likely shift back to smaller vessels, such as Aframaxes, reversing the current trend favouring Suezmaxes for longer-haul routes to destinations like India. Currently, the majority of Russian Crude shipments head to India, influencing both cargo volumes and vessel utilization patterns.
The shift to shorter routes and smaller vessels could partially absorb some of the incoming Aframax supply. However, this adjustment would translate to shorter distances and reduced ton-mile demand. Given the subdued outlook for overall market demand, such changes are expected to result in a decline in Tanker utilization rates. Consequently, utilization is anticipated to revert to pre-pandemic levels, removing the most contributing factor in increased Suezmax utilization. As shown in the below graphs, utilization of Suezmax and Aframax out of Russia, started to pick up only after the reshuffling of trade to India.
Adding a spanner in the works, the substantial growth projected for the Aframax/LR2 fleet is likely to outpace demand, exacerbating oversupply. As a result, the net effect on rates would be negative, putting downward pressure on freight rates despite the shift in trade flows.
2026: Oversupply Challenges Ahead
The outlook for 2026 becomes more challenging, as fleet growth accelerates across all segments, particularly Aframax/LRs. With a projected growth of 11.3%, Aframax/LRs will experience a significant oversupply, outstripping demand growth and creating serious market risks. Suezmaxes, growing by 5.0%, also face pressure, though to a lesser extent. VLCCs, with a modest growth of just 2.1%, are better positioned to maintain market balance.
The future of the shadow fleet adds additional uncertainty. If geopolitical tensions ease, a wave of reintegrated shadow fleet vessels—many of which are Aframax/LRs—could flood the market, further destabilizing it. Shorter trade routes, such as Russian crude exports to Europe, would reduce ton-mile demand, amplifying the oversupply risk.
Even without significant geopolitical changes, the sheer volume of Aframax/LR deliveries in 2026 could create substantial market challenges. Scrapping rates would need to rise sharply to offset this growth, but the current market conditions do not support widespread recycling.
Scenarios for 2025-2026
Scenario 1: Sanctions Persist
If sanctions remain in place, shadow fleet operations will continue to contribute inefficiencies, helping to sustain ton-mile demand. This could absorb some of the Aframax/LR supply growth, though not entirely. As a result, Aframax/LR rates may come under pressure, while VLCCs and Suezmaxes maintain relative stability.
Scenario 2: Partial Sanction Relief
A partial lifting of sanctions, such as a limited resolution to the Ukraine conflict, could see Russian Crude rerouted back to Europe via shorter distances. This would erode ton-mile demand and reintegrate shadow fleet vessels into mainstream trades. Aframax/LRs, with their significant role in shadow fleet activities, would face the greatest rate pressures in this scenario, putting also additional pressure on Suezmaxes, as shorter routes favour smaller vessels.
Scenario 3: Full Sanction Lifting
A comprehensive resolution, resulting in a full lifting of sanctions, would lead to widespread reintegration of shadow fleet vessels and a shift toward significantly shorter trade routes. Combined with peak Aframax/LR fleet growth in 2026, this scenario could trigger severe oversupply across all tanker segments. Aframax/LRs, in particular, would experience steep declines in utilization and rates.
Preparing for a Dynamic Market
The Tanker market from 2025 to 2026 will face mounting challenges, particularly in the Aframax segment, where fleet growth is set to outpace demand. While ton-mile demand, driven by sanctions and long-haul routes, may provide some relief, the risk of oversupply in 2026 is significant. The Shadow fleet remains a critical wildcard in this dynamic. Its continued isolation could sustain inefficiencies that help absorb capacity, while its reintegration into mainstream trades would exacerbate oversupply risks. The industry will need to remain agile in response to these evolving geopolitical and market factors.
Our AXSTanker and Alphatanker platforms provide you with the ability to monitor and observe the global Tanker fleet in every aspect, allowing you to stay on top of the market and meet the challenges lying ahead.
