The rebound in the tanker market has now become apparent in the product tanker segment as well, since shipbrokers report that there has been a significant change in fortunes for LR2 and LR1 tankers in recent months.

According to the latest weekly report from shipbroker Gibson, “spot earnings for these units were particularly depressed during the first half of this year, with average TCEs during the period barely above $11,000/day.

However, since July/August the market has moved from strength to strength . Both LR2 and LR1 earnings in the East a averaged in October at their highest level since early 2009.

Although freight levels have softened as the week progressed, nonetheless, at current levels earnings of around $34,000/day for LR2s and $25,500/day for LR1s on the benchmark trade still represent a superb return”.

The London-based shipbroker noted that “for quite some time, we have been forecasting significant increases in long haul product tanker demand on the back of expanding refining capacity in the Middle East. T

he 400,000 b/d Jubail refinery reportedly reached full scale operations in August/September this year and this has clearly offered support to the product tanker market. Going forward, there is more to come.

The 420,000 b/d Yanbu refinery has already started test runs and theexpectations are for exports to commence next month. Another refinery in the region – the 420,000 b/d Ruwais plant in Abu Dhabi is also targeting to start production later this year.

Finally, the 400,000 b/d Jizzan refinery is scheduled to come onstream in 2016. The start-up of modern and large scale refining capacity in the Middle East will support major increases in the long haul products trade, while at the same time it will create additional pressure on the aging refining system in Europe and in some countries in the Asia Pacific”.

Gibson added that “apart from stronger demand in the East, LRs are also benefitting from more trade in the West, although the focus here has been mainly on LR1s.

The biggest development over the past couple off years has been a dramatic increase in LR1 shipments from the UK Continent to West Africa: this trade has grown from virtually nothing a few years ago to regular two/three 60,000 tonne cpp cargoes every week.

At the same time, we have also seen an increase in LR1 and LR2 naphtha shipments from the UK Continent or Mediterranean to the East, yet this trade is predominantly arbitrage driven.

Finally, there also has been an increase in LR1 trade from the US Gulf to the UK Continent, East and South/Latin America. As long as US refinery margins remain strong, there is a potential for further increases in US products exports and with it further increases in clean tanker demand”, the shipbroker concluded.

Meanwhile, in the crude tanker markets this week, in the Middle East, the market “remained relatively strong for VLCCs, but the party spirit of last week definitely faded, and as Charterers scented the mood change, started to withold somewhat, and rates eased back to mid ws 50’s East and around ws 30 to the West via Cape.

No collapse on the immediate cards, but Owners will be put more on their mettle to hold the line over the coming week. Suezmaxes also lost a little of their previous lustre, but again, not enough to severely dent what remains a reasonably robust scene.

Rates dipped a touch to 130,000 by ws 90 to the East and under ws 60 to the West. Aframaxes didn’t see large volumes, but they were sufficient to allow for the upward rate-roll to continue, pushing levels to 80,000 by ws 125 to Singapore with maybe more to come over the next period”, Gibson concluded.

Source:  Hellenic Shipping News Worldwide