24 May 2019: OPEC production has always been a significant driver of tanker demand and rate volatility.  Most of its membership (and oil production) resides in the Middle East (75% in March 2019) and most of the demand for its product comes from Asia.  The infrastructure on both sides of this trade is highly efficient and because of their economies of scale, VLCCs dominate the Middle East to Asia trade.  In the first quarter of this year, 85% of the seaborne crude oil trade on this route was handled by VLCCs, with only 11% done on Suezmaxes and 4% on Aframax tankers.  Unfortunately, the Middle East is not only the largest crude oil producing region in the world, it is also the dominant source of geopolitical tension as well as the self-appointed market arbiter that is responsible for keeping the global crude oil markets balanced.  The combined result of all these factors is that the oil markets in general and OPEC’s production in particular have become rather unpredictable.  This is having an outsized impact on the tanker market.

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