MRs: where the money is in tankers

Even LR1s and LR2s going east, who have had a pretty indifferent market the last few years, managed to put on a bit of traction. LR1s Gulf/Japan advanced to $11,000 a day average earnings, and LR2s on the same route $16,500 a day.

Otherwise for the large crude tanker market the outlook is still pretty catastrophic. VLCC voyages AG/West are losing $15,000 a day and AG/East are barely clearing $3,000 a day. Suezmaxes are faring better with average earnings put by Clarksons at $16,859 a day but heading south. On the trademark WAF/US route, earnings are hovering just above a breakeven operating cost of say $9,500 a day - way below cash breakeven costs on the vessels.

However, the recent spike in recent suezmax rates has already begun to crash. The culprit is reduced US demand for light crudes from West Africa combined with growth in suezmax supply. Currently there are 64 suezmaxes on order, 14% of the current fleet of 472 vessels according to London broker EA Gibson. The age profile of the current fleet is very young - over 40% of the current trading fleet is very young, less than five years old, so there are few scrapping candidates.

Ten of those ships on order are destined for charter to Petrobras for shuttle operations so are unlikely to disturb the spot market for many years. So perhaps the outlook is not as gloomy as it might be for these workhorses of the crude market.