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How the current tanker boom could be sowing the seeds of the next bust
DNV’s Global Business Director for Tankers Catrine Vestereng discusses the coalescing trends that could leave the tanker market facing a vessel glut
Geopolitical strife and ageing tankers used for sanctioned trading combined with limited vessel recycling and historically high orders could be setting the stage for an oversaturated market.
The tanker market’s extraordinary run of earnings over the last year, set against an extended tonne-mile demand map redrawn by the ‘forever wars’ of the 2020s, may have recreated a familiar pattern for tanker owners: when ships are making money, shipowners are tempted to order more of them.
For Catrine Vestereng, head of tanker markets at classification society DNV, that dynamic is becoming intertwined with some of the sector’s biggest uncertainties.
“Everybody wants a newbuilding because when they [see they can] earn money, they want to earn more,” she told Riviera in an interview at shipping trade show SMM, in Hamburg.
The recent surge in tanker ordering has coincided with wars that have transformed tanker trading and drawn commercial shipping in as a geopolitical pawn.
Russia’s invasion of Ukraine, Western sanctions, Houthi attacks in and around the Red Sea and, more recently, a war that has radiated through and beyond Middle East shipping lanes, have radically altered established trading patterns and driven up tonne-mile demand.
Ms Vestereng is reluctant to call the current market a “supercycle,” though. Instead, she describes it as “turmoil-driven”.
“Of course you can call It a supercycle, but it’s just a lot of events that have created it,” she said. “It’s a turmoil-driven market, and that’s a special [case].”*
Ms Vestereng’s distinction is apt given that the current extraordinary rate environment for tankers is not being driven by fundamentals such as underlying growth in oil demand. Much of the run on tanker rates is the result of widespread dislocation and a bifurcated fleet.
Ships are travelling much further to move the same cargoes, while a large part of the global fleet has effectively been divided between ‘legitimate’ mainstream trading and the sanctioned, or so-called ’dark’ fleet.
*Editor’s note: Well-known maritime economist Dr Martin Stopford has described supercycles as often lasting for decades, and acknowledged this year in an interview during Singapore Maritime Week that a supercycle that began in the late 1990s for shipping has now come to an end. Dr Stopford said the linear growth pattern that characterised shipping markets in the latter half of the 20th century has broken down and given way to a market facing intersecting structural shifts from decarbonisation, digitalisation, geopolitical tension and supply chain reconfiguration.
A market scenario driven by longer voyages
As Ms Vestereng explains, traditionally, a VLCC could load in the Middle East and sail directly through the Strait of Hormuz towards Asia, but geopolitical disruption and sanctions have changed the way some cargoes move.
Oil is often travelling through alternative routes and pipelines before being loaded further west, and often circumnavigating Africa, with the result being dramatic increases in voyage distance.
Vestereng estimates that a Middle East-to-China voyage that might historically have generated around 6,000-7,000 nautical miles of demand can now reach roughly 15,000 nautical miles.
“That’s what really creates the market right now,” she says.
For owners, the effect has been lucrative.
VLCC earnings surged above US$100,000 per day during a strong market late in 2025. Over the first nine months of 2026, those day rates have undergone an order of magnitude shift. The first US$1M/day deal hit headlines in early September.
But Ms Vestereng questions how permanent those longer-haul patterns will prove to be when those paying for cargoes have more and safer options to draw a straighter, shorter line from vessels’ loading points to their final destinations.
“No one [paying for a cargo] wants to go the long haul if they can avoid it,” she says, adding the question that the logic begs. “So if the war ends, they wouldn’t go back to the shorter distance again?”
If the war ends, and if rates dropped, a vessel ordered based on today’s elevated tonne-mile demand picture could enter service in a few years into a much less lucrative trading environment for shipowners.
They are both big ’ifs’, but the cyclical tanker market has historical precedent for an ordering boom followed quickly by a precipitous drop in rates. The most recent example comes from less than 20 years ago. In 2008, speculative ordering turned quickly into a loss-making proposition for owners. A large orderbook-to-fleet ratio collided with a global financial crisis resulting in an oversupplied market and a steep and prolonged slide in day rates.
The dark fleet conundrum: ‘the sanctioned fleet is so big’
Another distinct variable at play in the future supply-demand balance surrounds what will happen to the huge fleet of sanctioned tankers if and when geopolitical conditions change and more traditional trading patterns return.
The sanctioned fleet has become a significant part of the global tanker system, and by operating outside much of the mainstream chartering market, this bifurcated fleet has taken some tonnage out of the conventional market.
That shift has helped support rates for the compliant fleet, but if those ships return to mainstream trading, Vestereng warns, the consequences could be dramatic.
“The sanctioned fleet is so big,” she says. “If they enter the [mainstream] market again, we will be flooded by vessels.”
Where will all the old ships go?
While the two-tiered market may well persist with a return to a more stable geopolitical seascape, the uncertainty of a potential oversupply that the current two fleet system could present for a more streamlined tonne-mile market is further compounded by the age of much of the existing tanker fleet.
“Charterers do not accept these old vessels, so it might be that still we will have a kind of two-tiered market,” she says, pointing to a potential low-rate environment pushing vessels out of the market and asking, “what will happen to those vessels?”
Recycling could help, but as Ms Vestereng points out, the volume of potential vessels to process easily outpaces available yard space and regulations remain tricky to navigate.
Citing the more than 40M gross tonnes (gt) of new tonnage that had reportedly been ordered over the first several months of 2026, she noted that there is not enough recycling capacity to quickly absorb the vessels that would need to exit the market to find a supply-demand equilibrium point.
Difficulties surrounding recycling are particularly acute for sanctioned ships, she notes.
“You cannot really take a sanctioned vessel to a corporate scrapping yard because they are not allowed to take it in,” she says.
Ms Vestereng believes regulators and governments may need to confront that issue directly, including finding ways for sanctioned vessels to be safely and legally recycled.
The United States and Europe could open avenues for such vessels to enter recycling streams, while India and other major recycling centres will have to balance the practical demand for capacity with the requirements of international recycling rules.
The stakes are not purely commercial, with Ms Vestereng expressing concern for seafarers who may be unaware that they are serving on board sanctioned, and potentially uninsured ships.
Ms Vestereng said one of her major worries is focused on the people working aboard these ships, pointing to the often grave risks faced by seafarers operating in conflict zones as well as those aboard sanctioned vessels.
Owners want efficiency, not expensive fuel bets
For larger shipowners, however, the immediate question is less about the fate of the sanctioned fleet and more about what to order while earnings remain strong.
Ms Vestereng said she spends time working with owners on newbuilding specifications and fleet optimisation, and with newbuilding prices high, she says owners are selective about where they invest in efficiency.
On the whole, Ms Vestereng said the current market preference is for incremental efficiency rather than a wholesale switch to alternative fuels.
Tanker owners are generally not choosing alternative fuels because the economics remain difficult, she says. Instead, they are adopting technologies that can reduce fuel consumption without adding capital-intensive investments.
The options most owners are looking to include optimised hull lines, propeller improvements, waste-heat recovery, shaft generators and other established efficiency measures, but, as she notes, “it depends on what kind of ship you have”.
Large crude tankers have relatively limited scope for further optimisation, whereas product and chemical tankers can achieve more through improvements to pumps, discharge systems, tank cleaning and operational efficiency.
Shuttle tankers are a segment with even more room for adoption of new technology. For those vessels, batteries and increasingly sophisticated dynamic-positioning systems are becoming more relevant, while ethanol could emerge as a fuel option for some Brazilian operators.
But Vestereng does not expect tanker owners to make a leap to new fuels in the current ordering cycle. The commercial incentive simply isn’t strong enough yet. Owners may want more efficient ships, but charterers are often unwilling to pay a premium for the additional technology.
“We need the regulation to drive that next step,” she says. “Right now no one wants to pay for it.”
The next tanker ordering cycle could see a very different ship
The bigger transformation, she believes, will come in the following ordering cycle.
Future tankers will need to be designed not just around fuel efficiency but around a looming shortage of seafarers. Automation, digitalisation and shipboard systems that reduce crew workload will become increasingly important.
Ms Vestereng expects future designs to be more highly optimised, with greater use of digital monitoring and automation and, eventually, new fuels.
But the timing remains uncertain because the production infrastructure for those fuels has not yet developed at sufficient scale.
Tanker market strong through 2027
Despite the looming potential risks, Ms Vestereng remains relatively bullish on tanker markets, at least in the near-term.
She expects the market to remain strong into 2027, arguing that even if the current wars and geopolitical disruptions to tanker routes end, it will take time for trading patterns to normalise.
One of Ms Vestereng’s analysts takes a more bearish view, she says, arguing that the market could fall sharply if the underlying demand environment changes suddenly.
Ms Vestereng remains more optimistic, but she also sees the first signs of a potential reversal.
The new ships being ordered now will start arriving from next year, adding supply just as the market could begin to lose some of the extraordinary tonne-mile support created by today’s geopolitical conditions.
That could produce the classic tanker cycle: strong earnings drive ordering, ordering eventually creates excess supply, and rates fall.
Still, she finds positivity in the ordering boom because it is, at least, accelerating fleet renewal.
“I’m very positive that all this ordering, we are getting a modern fleet out there,” she says. “I think that’s good.”
The newer ships will be more efficient, reducing emissions even without a wholesale switch to alternative fuels.
On safety, too, Ms Vestereng sees a reason for confidence. DNV’s analysis of damage and safety statistics across the global fleet shows tankers performing particularly well.
With so much uncertainty, the truth is that the tanker industry’s current windfalls offer both opportunity and risk.
For now, the outcome is likely to be continued strong rates and more ordering. But the chance remains that the tanker industry’s next downturn could already be taking shape in today’s shipyards.
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