Tankers transport crude oil and refined oil products from oil producing sites to refineries or other points of consumption. Typical clients for the vessels include oil companies, oil traders, government agencies and petroleum producers. Oil is transported under different types of contracts (similar to leases) which include spot (or voyage) charters, time charters, and bareboat charters. When using the Spot Charter the owner of the crude rents the tanker for a specific voyage and the tanker owner is paid by the amount of cargo (in tons) that the ship transports from point A to point B.
The tanker owner is responsible for all the costs of the voyage. With the Time Charter the owner of the crude rents the vessel for a specific period of time (3 months to 10 years) for a fixed daily rate and can direct the ship to any port as they deem appropriate. The tanker owner is paid by the carrying capacity of the tanker. The crude owner or charterer pays all port and fuel fees while the tanker owner pays all the remaining costs for the operating of the tanker. In a Bareboat Charter the shipowner leases the vessel to an operator who in return acts as an owner and charters it out to a third party.

Pricing of these contracts depends mainly upon the type of contract and the demand levels. Brokers act as intermediaries matching the vessels  to the charterer. Major worldwide shipping hubs are located in New York, London, Oslo, Singapore and Tokyo.

The tanker market is highly cyclical. Freight rates move due to the balances of vessel demand and supply with expectations of future capacity. Three main factors today affect the growth in the tanker industry; increasing oil consumption, increasing import dependency and increasing voyage lengths. Cost of transportation for the crude owners is only a small fraction of the total cost of oil. However, when freight rates remain high for a long time, oil companies prefer short-haul voyages to longer hauls and may affect the tanker demand in the long run. As for the supply of capacity, there is a significant number of new ship buildings expected in the near future. Some of this supply will be absorbed by the scrapping of older vessels and some by the single hulled tankers being phased out as decreed by the IMO regulations. In this capital intensive high fixed cost business, today’s shipowner must have a solid reputation, operate a modern dependable fleet and maintain a strong balance sheet.