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While 2025 was initially expected to continue the weak trend seen in late 2024, the year instead opened with fresh uncertainty. The US government imposed sanctions on over 180 tankers and later took a tougher stance on vessels carrying oil from Iran, Russia, and Venezuela. This was followed by reciprocal tariffs on most countries (liberation day), raising fears of a global trade war and slowing oil demand growth. Consequently, all stocks across the globe plummeted, with crude and product tanker stocks taking a significant hit. However, the outlook shifted after the tariff policy was suspended for 90 days, leading to a partial recovery.

Interestingly, the rebound has been uneven: as of 9 May 2025, the Drewry Crude Tanker Equity Index is up 10.9% YTD, while the Drewry Product Tanker Equity Index remains down 12.9%, highlighting a growing divergence between the two sectors. In this opinion piece, we decode the reason for divergence and include our views on what lies ahead.

Figure 1: DCTEI continues to outperform DPTEI and S&P 500

Notes: DCTEI includes CMB.TECH, Frontline, DHT Holdings, Teekay Tankers, Nordic American Tankers and Tsakos Energy Navigation DPTEI includes Ardmore Shipping, Scorpio Tankers, Hafnia Limited, Torm PLC and d’Amico International Shipping. Indexed as of 31 December 2024 and priced as of 09 May 2025.

Source: NYSE, Drewry Maritime Financial Research

This divergence between crude and product tanker equities is driven by multiple factors, particularly those weighing on the product tanker segment. Market fundamentals have weakened more for the product segment than for crude and a key reason for this is ample tonnage availability.

Higher product tanker deliveries weakening spot rates

In 2022-23, product tanker earnings were soaring, with product tanker operators ordering a significant number of new vessels. These vessels began entering the market from 2H24, leading to a sharp increase in available capacity, adding downward pressure on freight rates. As of YTD 2025, 50 product tankers have been delivered, compared to just 9 crude tankers, highlighting the stark difference in fleet expansion. The crude tanker orderbook to fleet ratio is 11.2% (as of May 2025) compared to 20.5% for that of product capable tankers.

Figure 2: Orderbook delivery schedule

Note: Product tanker includes Product capable tankers.

Source: Drewry Maritime Research

Between 2025 and 2028, the product tanker segment is expected to face increased pressure due to a significantly higher number of vessel deliveries compared to crude tankers. This influx of new tonnage is likely to suppress freight rates in the coming quarters, raising concerns among investors about the future earnings of product tanker companies, which is already reflected in their declining share prices.

Slowing CPP demand further squeezing spot rates

Compounding this impact, the growth for refined product demand is also slowing due to rising electrical vehicle (EV) adoption and better fuel efficiency, particularly affecting diesel and gasoline (80% of CPP demand). Simultaneously, new refining capacity in West Africa (Nigeria’s Dangote) and Mexico (Olmeca) is increasing regional output and decreasing import reliance, while refinery closures in Europe are further dampening the demand for product tankers, which continues to weaken the outlook for the product tanker segment.

Crude sector outlook comparatively more positive than product

In contrast, the crude tanker market has a more positive outlook. After a sluggish 2024, global refinery runs are projected to rebound in 2025, boosting the demand for seaborne crude, especially benefiting VLCCs. Rising crude imports by Asian refiners, particularly in China, are expected to support utilisation. Additionally, US sanctions on Russian tankers and Iranian oil may disrupt trade flows, encouraging countries like India and China to seek alternative crude suppliers, thus increasing longhaul tanker demand. The mid-size tanker market could also tighten as non-sanctioned vessels are reallocated to Russian trade. Finally, the drop in asset prices has deepened the divergence between segments, with product tanker values, especially for 5-year-old LR2s (-7.2%) and LR1s (-8.0%), falling more sharply than their crude counterparts like VLCCs (-2.4%) and Suezmaxes (-0.6%).

Figure 3: Asset prices of crude tankers remain comparatively stable

Source: Drewry Maritime Research

Figure 4: Asset prices of product tankers

Source: Drewry Maritime Research

Divergence to prevail in remaining months of 2025

The tanker market in 1Q25 exhibited a clear divergence between the crude and product segments, a trend expected to persist until the end of the year. The combination of rising product tanker deliveries amid subdued oil demand growth is likely to substantially reduce the earnings of product tanker companies compared to crude tanker companies. Additionally, asset prices for product tankers are declining more steeply, underscoring their weaker market fundamentals. Overall, the outlook appears more favourable for the crude tanker segment.

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