A surge in crude tanker vessel capacity over the next two years will lead to a fall in ship-owner earnings from current highs, according to a recent report from Drewry, the London-based global shipping consultancy.

Rising capacity is being driven by anticipated tonnage demand growth in the dirty tanker market, which is expected to gather momentum once U.S. shale oil production starts shrinking. Tonnage demand in the product tanker market has been increasing with the expansion of refinery capacity in Asia and the Middle East. Dirty tankers carry unrefined products such as crude oil.

One of the primary reasons behind the recent surge in tanker freight rates, particularly in the dirty tanker market, according to Drewry, has been sluggish fleet growth over the last two years. However, as the fleet is likely to expand rapidly in the next two years, the tanker rate picture will be undergoing a few changes.

“Drewry expects annual growth in the crude tanker fleet to accelerate from 0.7 percent in 2014 to around five percent over the next two years, to reach 377 million deadweight tons [dwt] by the end of 2017,” said Rajesh Verma, Drewry’s lead analyst for tanker shipping. “However, this growth is expected to recede thereafter, assuming vessel ordering remains controlled.”

Attractive freight rates and a growing trade on long-haul routes resulted in substantial ordering in the large vessel segments, especially since the second half of 2014. “A total of 42 million dwt of capacity has been ordered since 2014, which compares with just 25 million in 2012 and 2013, when a bearish freight market and tight credit availability checked ordering,” added Verma.

A surge in U.S. shale oil production had held back growth in the global seaborne crude trade. But the recent collapse in oil prices has checked shale output and increased worldwide stocking activity, boosting demand for crude tanker tonnage. Drewry expects the global oil trade to strengthen further, fueled by rising U.S. crude imports and an increase in Asian refining capacity.

“Lower bunker prices continue to support vessel earnings and increased ordering of large vessels reflect optimism in the market,” added Verma. “So long as ship owners abstain from excessive ordering in the coming years, we can expect fleet growth to slow after 2017, which in combination with the prospective increase in global oil trade will lead to some longer term recovery in crude tanker earnings.”