The crude oil freight market remains highly volatile, with recent spikes in VLCC rates on the MEG-China route. While tonne-day demand growth has yet to show signs of recovery, market sentiment appears to be firming, driven by uncertainty surrounding oil price fluctuations and China's crude oil demand. Additionally, the impending implementation of U.S. tariffs on the energy sector adds to the instability.
Recent reports confirm that the U.S. has decided to pause the planned tariffs on Canadian and Mexican oil, which were initially set to take effect in early 2025. This decision temporarily alleviates concerns about the potential disruption to Canadian oil exports, particularly to the U.S. Atlantic Coast, which holds a significant 60.3% share of Canadian oil flows. As a result, in the short term, oil shipments to key U.S. destinations are expected to remain stable, providing some relief for exporters.
However, despite this temporary suspension, policy uncertainty persists, particularly regarding the possibility of tariffs being reintroduced in Q2 2025. Should this occur, Canadian oil exports to the U.S. would likely decline, pushing suppliers to seek alternative markets in Europe, Asia, or the U.S. Gulf. In January 2025, Canada exported 2.2 million tonnes of oil, with approximately 1.33 million tonnes (60.3%) directed to the U.S. Atlantic Coast. Looking ahead, if the tariff suspension holds, February 2025 oil flows to the U.S. Atlantic Coast are expected to remain steady at around 1.3 to 1.35 million tonnes as buyers capitalise on the tariff-free window.
By March 2025, if no tariffs are imposed, volumes should remain stable. However, should the U.S. reinstate tariffs, a 5-10% decline in shipments is anticipated, reducing volumes to around 1.2 to 1.25 million tonnes as buyers adjust their purchasing strategies. For the entirety of Q1 2025, assuming the tariff suspension remains in place, oil flows to the U.S. Atlantic Coast are projected to reach between 3.9 million and 4.1 million tonnes. If tariffs are reintroduced by March, the Q1 total may dip to 3.8 million tonnes or lower, with further declines expected in Q2.
As for vessel utilisation, Aframax tankers play a dominant role in Canadian oil exports, accounting for 42.2% of the total. In the absence of immediate tariff enforcement, Aframax utilisation is expected to remain strong in Q1 2025, particularly for short-haul routes to the U.S. Atlantic Coast. However, if tariffs are reintroduced in Q2 2025, demand for Aframax tankers on U.S. routes may decrease, potentially leading to a shift in cargoes to Suezmax tankers for longer-haul shipments to Europe. This could result in a softening of Aframax freight rates due to reduced demand, prompting a reallocation of vessels to new routes.
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Creating a sustainable world requires us to embark on a journey towards a zero emission future, where every step is a commitment to preserve our planet for future generations.
Albert Greenway
Environmental Scientist, Sustainability Expert
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Increased Use of Renewable Energy:
Shipping companies are embracing renewable energy sources to power onboard systems and reduce emissions during port operations. Solar panels and wind turbines are being installed on vessels to generate clean energy, reducing reliance on auxiliary engines, and cutting down emissions. Shore power facilities in ports allow ships to connect to the electrical grid, eliminating the need for onboard generators while docked.
Collaboration and Industry Partnerships:
Recognizing that addressing emissions requires collective action, shipping companies, governments, and organizations have formed partnerships and collaborations. These initiatives focus on research and development, sharing best practices, and promoting knowledge transfer. Joint projects aim to develop and deploy innovative technologies, improve infrastructure, and create a supportive regulatory framework to accelerate the industry's transition towards a greener future. The Zero Emission Shipping - Mission Innovation.
To pave the way for a greener future in shipping, the availability of alternative fuels plays a vital role in their widespread adoption. However, this availability is influenced by factors such as port infrastructure, local regulations, and government policies. As the demand for cleaner fuels in shipping rises and environmental regulations become more stringent, efforts are underway to improve the accessibility of these fuels through infrastructure development, collaborations, and investments in production facilities.
Liquefied Natural Gas (LNG) infrastructure has seen significant growth in recent years, resulting in more LNG bunkering facilities and LNG-powered vessels. Nonetheless, the availability of LNG as a marine fuel can still vary depending on the region. To ensure consistent availability worldwide, there is a need for further development of LNG supply chains and infrastructure. For biofuels, their availability hinges on production capacity and the availability of feedstock. Although biofuels are being produced and utilized in various sectors, their availability as a marine fuel remains limited. Scaling up biofuel production and establishing robust supply chains are imperative to ensure wider availability within the shipping industry.Hydrogen, as a fuel for maritime applications, is still in the early stages of infrastructure development. While some hydrogen vessels have been tested or introduced in the first quarter of last year, the infrastructure required for hydrogen production and distribution needs further advancement.
Ammonia, as a marine fuel, currently faces limitations in availability. The production, storage, and handling infrastructure for ammonia need further development to support its widespread use in the shipping industry.Methanol, on the other hand, is already a commercially available fuel and has been used as a blend with conventional fuels in some ships. However, its availability as a standalone marine fuel can still be limited in certain regions. Bureau Veritas in October 2022 published a White Paper for the Alternative Fuels Outlook. This white paper provides a comprehensive overview of alternative fuels for the shipping industry, taking into account key factors such as technological maturity, availability, safety, emissions, and regulations.
Creating a sustainable world requires us to embark on a journey towards a zero emission future, where every step is a commitment to preserve our planet for future generations.
Albert Greenway
Environmental Scientist, Sustainability Expert
Increased Use of Renewable Energy:
Shipping companies are embracing renewable energy sources to power onboard systems and reduce emissions during port operations. Solar panels and wind turbines are being installed on vessels to generate clean energy, reducing reliance on auxiliary engines, and cutting down emissions. Shore power facilities in ports allow ships to connect to the electrical grid, eliminating the need for onboard generators while docked.
Collaboration and Industry Partnerships:
Recognizing that addressing emissions requires collective action, shipping companies, governments, and organizations have formed partnerships and collaborations. These initiatives focus on research and development, sharing best practices, and promoting knowledge transfer. Joint projects aim to develop and deploy innovative technologies, improve infrastructure, and create a supportive regulatory framework to accelerate the industry's transition towards a greener future. The Zero Emission Shipping - Mission Innovation.
To pave the way for a greener future in shipping, the availability of alternative fuels plays a vital role in their widespread adoption. However, this availability is influenced by factors such as port infrastructure, local regulations, and government policies. As the demand for cleaner fuels in shipping rises and environmental regulations become more stringent, efforts are underway to improve the accessibility of these fuels through infrastructure development, collaborations, and investments in production facilities.
Liquefied Natural Gas (LNG) infrastructure has seen significant growth in recent years, resulting in more LNG bunkering facilities and LNG-powered vessels. Nonetheless, the availability of LNG as a marine fuel can still vary depending on the region. To ensure consistent availability worldwide, there is a need for further development of LNG supply chains and infrastructure. For biofuels, their availability hinges on production capacity and the availability of feedstock. Although biofuels are being produced and utilized in various sectors, their availability as a marine fuel remains limited. Scaling up biofuel production and establishing robust supply chains are imperative to ensure wider availability within the shipping industry.Hydrogen, as a fuel for maritime applications, is still in the early stages of infrastructure development. While some hydrogen vessels have been tested or introduced in the first quarter of last year, the infrastructure required for hydrogen production and distribution needs further advancement.
Ammonia, as a marine fuel, currently faces limitations in availability. The production, storage, and handling infrastructure for ammonia need further development to support its widespread use in the shipping industry.Methanol, on the other hand, is already a commercially available fuel and has been used as a blend with conventional fuels in some ships. However, its availability as a standalone marine fuel can still be limited in certain regions. Bureau Veritas in October 2022 published a White Paper for the Alternative Fuels Outlook. This white paper provides a comprehensive overview of alternative fuels for the shipping industry, taking into account key factors such as technological maturity, availability, safety, emissions, and regulations.
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