Entering the fourth quarter, oil markets will begin to see the global uptick in production finally hitting the water, according to executives at International Seaways, who have observed a divergence in supply-side factors driving clean and dirty tanker freight rates.

“We have not seen the full scope of what could be on the water soon,” CEO Lois Zabrocky said during the company’s third-quarter earnings call Nov. 6. “The fourth quarter looks to be the environment where increased production is hitting the water.”

Tanker markets are returning to their typical dynamic with spot rates for Very Large Crude Carriers leading the way at “healthy” levels, which have “naturally benefited the Suezmax and Aframax [classes]” through reduced availability as larger vessels capture longer-haul trades, Derek Solon, chief commercial officer, said.

Executives cited OPEC’s reversal of the group’s voluntary crude production cuts, which will supplement the market’s 1 million b/d of production growth, according to Zabrocky.

Alongside it, production growth from the Americas further supported strengthening spot rates, all pulled forward by record demand.

Zabrocky added that tanker demand was bolstered by oil demand growth of around 1%, with fourth-quarter fixtures well above year-ago levels.

Diverging push to clean, dirty spot rates

While dirty tankers were benefiting from record levels of crude on the water, executives said they were “not sure where the [barrels] are going to land yet.”

The tanker operator was monitoring the forward curve carefully, with Solon adding that it remained “pretty flat” and not in contango, limiting immediate floating storage incentives despite disagreements between the IEA and OPEC over actual production growth levels.

Meanwhile, pressure was mounting in the clean tanker market, particularly in the absence of Russian diesel, which has resulted in longer voyages as the country’s traditional buyers look for new sources of supply.

“That void is being filled by the US and Latin America,” Zabrocky said, attributing healthy MR rates to the reshuffling of trade routes and limited refined product availability.

According to International Seaways, sanctioned barrels from Russia and Iran — usually transported to buyers in India and China — was keeping freight elevated.

The pressure on the two countries’ exports, and the possibility of further sanctions, could keep the tanker market in a bullish position going forward.

Tanker rates and vessel supply

While higher quarter to quarter and firming up, the company reported softer spot tanker earnings as Suezmax crude carriers averaged $33,300/day compared to $38,000/day in the prior quarter.

Average spot earnings in the LR1 class fell to approximately $34,600/day from $46,900/day in Q3 2024.

Medium-range product tankers showed more resilience, with average spot earnings of $25,600/day compared to $29,000/day in the third quarter of 2024.

As of Oct. 1, 2025, International Seaways had 14 vessels secured on time charter agreements with an average duration of 1.5 years, providing contracted revenue visibility of approximately $229 million through contract expiry, excluding any applicable profit-sharing arrangements.

Meanwhile, fleet supply remains severely constrained, with orders slowing in 2025 following last year’s surge. Fleet growth overall is modest at around 2%, with the gap between older ships and the orderbook exceeding three to one.

Vessels currently on order represent just 14% of the fleet for delivery over the next four to five years, creating a supply-demand imbalance that should support rates.

“There’s simply not enough tankers to replace the current aging fleet,” Zabrocky said, with fewer than 800 ships delivering over the next four years.

The 800 ships represent one-third of the vessels likely to face challenges securing tonnage for global trade.

Source: Platts