At least three LR product tankers have been diverted from Saudi Arabia, where oil refineries are forced to reduce running rates following the weekend attacks on oil facilities, according to Kpler.
If the supply disruption in the oil kingdom prolongs, several analysts have predicted that demand for product tankers will decrease in the Middle East but increase in India and East Asia.
Based on vessel-tracking data, Kpler said the 73,900-dwt LR1 Polar Cod (built 2007) was diverted from Jubail to Sikka and Ruwais. Two LR2s, the 110,000-dwt Sti Savile Row (built 2015) and 114,900-dwt Sti Spiga (built 2015), were also diverted on to the same destination.
The three ships had been due to load clean petroleum products from the Saudi port, where Saudi Aramco, the country’s national oil firm, has joint venture refineries with Total and Shell.
Another two MRs, three LR1s and one LR2 scheduled to load from Saudi Arabia may be diverted soon, according to Kpler.
“Loadings and runs at Saudi Arabian refineries are expected to fall as well in the coming days,” Kpler analysts said in a note.
Braemar ACM said running rates at Saudi refineries in Rabigh and Jubail were cut to 60% as of Monday.
The attacks on the 7m bpd Abqaiq processing plant and the 1.2m bpd Khurais field have wiped out 5.7m bpd oil production in Saudi Arabia.
However, Saudi Aramco, Saudi Arabia’s national oil firm, has given little official information on its operation since last Saturday.
Citing unnamed sources, Bloomberg reported that less than half of the Abqaiq plant’s capacity can be restored quickly, and there is speculation that a full repair can take months.
Changing market dynamics
Spot earnings of product tankers have been eroded by rising bunker costs, with crude prices jumping on the news of attacks.
Based on Clarksons Platou Securities’ assessments, LR2 earnings were $15,800 per day, LR1 earnings were $11,600 per day and MR earnings $10,000 per day as of Tuesday morning. A day earlier, LR2 earnings were assessed at $18,000 per day, LR1 at $13,000 per day and MR earnings $11,000 per day.
Looking ahead further, earnings could be supported by changing demand patterns, though.
While product tanker demand is taking a hit from lower exports from Saudi Arabia, Europe is expected to source gasoil from elsewhere to fill the supply gap, potentially boosting long-haul LR shipments.
“Far East gasoil exports to Europe is likely to make up for a potential reduction in Saudi Arabia gasoil exports to Europe, as Saudi refineries reduce runs to make up for crude exports,” Baremar ACM said.
Moreover, Saudi Arabia has reportedly been planning to import oil products as domestic production falls.
“India is likely to be a source of much of The Kingdom’s product imports going forward. This is likely to boost demand for both LR and MR tankers,” Alphatanker said.
“Assuming a longer outage, it could also draw in cargoes from China, considering the surplus of clean products there.”
