The good news keeps on coming for product tanker owners as price differentials and reroutings combine to boost freight earnings.
Clarksons Research noted firm tanker market trends, with average clean carrier rates rising 28% week on week to $48,371 per day, amid surging LR tanker markets in Asia.
LR2 earnings more than doubled on the Saudi Arabia to Japan route to $77,626 per day, the UK firm reported.
Vortexa data showed that over the first two months of the year, Bab el-Mandeb transits into and out of the Red Sea were down nearly 2.5m barrels per day (bpd) for product ships.
Cargoes being transported around the Cape of Good Hope increased by 1.6m bpd.
More local trading has narrowed the overall tonne-mile boost somewhat, Fearnley Securities explained.
Brokers reported tonnage supply is extremely limited over the next week for product tankers.
“Underlying fundamentals for the product tanker space remain supportive,” Clarksons Securities said.
Last week saw a dramatic surge in average spot rates for LR2 and LR1 vessels, climbing 62% to $69,000 per day and 45% to $50,000 per day, respectively, analysts led by Frode Morkedal said.
“Unplanned refinery outages have hampered European clean petroleum product production, exacerbating the impact of seasonal refinery maintenance,” they added.
Prices rising
According to Argus data, total European refinery outages for March range between 900,000 bpd and 1m bpd.
As a result, diesel and other product prices have risen, creating arbitrage opportunities previously limited by the high cost of tanker detours around Africa to avoid Houthi attacks in the Red Sea, the analysts said.
The investment bank calculates, given that seaborne product trades account for up to 29% of global refinery outputs, a 3.5m bpd increase in refinery production could result in a 1m bpd boost to vessel cargoes.
Clarksons Securities believes this could be expected to increase fleet utilisation by about 4%.
This surge in volume has the potential to push MR spot rates to about $60,000 per day from a maximum of $40,000 per day now, the analysts said.
UK shipbroker Gibsons said the number of LR cargoes entering the market continued to build.
“LR2 owners are really pushing hard to inflate rates, but they need realistically to push to levels where for charterers it makes sense to go on subjects and get fixed,” the London shop added.
The brokerage argued that lump-sum offers over $7m for jet fuel cargoes going west was “maybe a touch too much” amid a standoff on Friday.
Gibsons estimated $6.75m as a more realistic level.
“The LR1s have very much enjoyed following the drive of the larger sizes but owners have taken slightly less aggressive steps on last-done rates and as such there has been more activity seen on this segment,” the broker said.
