Oil Commodities: Types of Oil Shipping Vessels - dummies

Oil Commodities: Types of Oil Shipping Vessels

By Amine Bouchentouf

One factor you need to consider if you’re planning to gain exposure to oil commodities through the oil-shipping industry is the ships themselves. Before you invest in a tanker stock, closely examine the fleet of vessels it operates.

To help you with this examination, here are some of the types of vessels used in the global crude oil-shipping industry:

  • Ultra Large Crude Carrier (ULCC): This type of vessel, known in the industry as the ULCC, is the largest vessel in the market. It’s used for long-haul voyages. It offers economies of scale because it can carry large amounts of oil across long distances.

  • Very Large Crude Carrier (VLCC): The VLCC is the vessel of choice for long-distance seaborne voyages. It’s ideally suited for intercontinental maritime transportation; its areas of operation include the Persian Gulf to East Asia and West Africa to the United States, among other routes.

  • Suezmax: This vessel is named thus because its design and size allows it to transit through the Suez Canal, in Egypt. The Suezmax is among the vessels used to transport oil from the Persian Gulf to Europe, as well as to other destinations. It’s ideally suited for medium-haul voyages.

  • Aframax: The Aframax, whose first four letters are an acronym for Average Freight Rate Assessment, is considered the “workhorse” in the tanker fleet. Because of its smaller size, it’s ideally suited for short-haul voyages and has the ability to transport crude and products to most ports around the world.

  • Panamax: Like the Suezmax, the Panamax gets its name from its ability to transit through a canal — in this case, the Panama Canal. This vessel is sometimes used for short-haul voyages between the ports in the Caribbean, Europe, and the United States.

Besides their catchy names, these vessels are identified by how much crude oil and products they can transport on sea. The unit of measurement used to capture this capacity is known as the Dead Weight Ton, or DWT. DWT measures the weight of the vessel, including all cargo it’s carrying. Most ships are constructed in such a way that 1 DWT is the equivalent of 6.7 barrels of oil.

Vessel Type Dead Weight Tons Oil Equivalent (Barrels)
ULCC 320,000 and up 2+ million
VLCC 200,000–320,000 2 million
Suezmax 120,000–200,000 1 million
Aframax 80,000–120,000 600,000
Panamax 50,000–80,000 300,000