Wall Street splits over tanker boom

Wall Street’s increasingly divided outlook for the tanker supercycle has taken another twist, with investment bank Evercore ISI dramatically raising its freight forecasts and share price targets while warning that the industry’s extraordinary earnings could be approaching their peak.

In research published yesterday, Jonathan Chappell of Evercore doubled his 2027 VLCC earnings forecast from $57,500 to $115,000 a day, while raising his 2026 projection by 97% to $215,000. The bank now anticipates fourth-quarter VLCC spot earnings averaging an extraordinary $476,000 a day on its modelled basis, before rates begin retreating through 2027.

Yet Chappell remains cautious about chasing tanker shares, warning that the market is being sustained by exceptional geopolitical disruption rather than conventional supply-demand fundamentals.

The seven tanker companies under Evercore’s coverage have gained between 72% and 154% this year, comfortably outperforming the broader stock market.

Chappell argued that tanker equities have effectively become a leveraged bet on continued Middle East instability, with their direction increasingly determined by geopolitical headlines rather than historical valuation metrics. The bank has lifted its Frontline price target from $41 to $53 but maintains an in-line rating, considerably below BTIG’s $70 target. Evercore also raised its DHT target from $19 to $26, while retaining an in-line rating, and it increased its Nordic American Tankers target to $7 while maintaining an underperform recommendation.

The bank sees better relative value in product tanker owners, including Scorpio Tankers, Torm and Ardmore Shipping, which it considers less vulnerable to an eventual normalisation of crude tanker earnings and asset prices.

Other Wall Street analysts remain more optimistic about the duration of the boom. BTIG’s Greg Lewis continues to favour tanker equities, arguing that depleted oil inventories and prolonged disruption could sustain exceptional earnings.

B. Riley Securities recently raised its International Seaways target to $140, while Jefferies said recently it believes tanker earnings will decline more slowly than investors anticipate. Jefferies puts average VLCC earnings at $65,000 a day in 2027, pointing to an ageing fleet and the potential for substantial inventory restocking. Its lower numerical forecast than Evercore’s illustrates how differences in freight assumptions do not necessarily translate into the same conclusions about equity valuations.

Shipbrokers, meanwhile, are increasingly identifying warning signs. Braemar reported exorbitant freight costs are encouraging Asian refiners to source shorter-haul Middle Eastern crude rather than Atlantic barrels, undermining tonne-mile demand. Affinity similarly reported a VLCC correction, although suezmax and aframax markets remain exceptionally strong.

Evercore identified another worrying development: its average forecast for global oil demand growth this year has deteriorated to a contraction of 1.75m barrels a day. The bank notes that the only other annual oil demand contractions over the past three decades came in 2009 and 2020, both followed by extremely difficult tanker markets.

The supply picture is equally troubling. Drawing on Clarksons data, Evercore forecasts tanker newbuilding deliveries of 50.1m dwt next year, rising to an unprecedented 62.8m dwt in 2028, with another 54.9m dwt scheduled for 2029 It calculates underlying net tanker fleet growth of 5.3% this year and 5.5% in 2027, before accounting for disruption-related inefficiencies.

Hartland Shipping Services separately forecasts more than 100 VLCC deliveries annually in both 2028 and 2029, levels last witnessed during the 1970s supertanker boom. BRS counts 283 VLCC orders scheduled for delivery from 2028 onwards.

Yet scrapping remains negligible. Banchero Costa records just four VLCC demolitions during the first nine months of 2026, despite an ageing fleet.

The market’s extraordinary distortions are also spilling into the courts. Commodity trader Mercuria’s challenge to the Baltic Exchange’s Gulf-China VLCC benchmark is now underway in London, questioning the reliability of assessments during the Hormuz crisis. The Baltic disputes the allegations.

Evercore warned yesterday that shipping costs are now approaching 25% to 30% of the value of the oil being transported, creating the risk that high freight rates themselves destroy demand. The bank nevertheless acknowledges that predicting the timing of any reversal is extraordinarily difficult.

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