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Product tanker trades finally start to come goodProduct tanker trades finally start to come good

The products trade good news story has taken some time to take off. But with Gulf/Japan earnings this year in the LR1 and LR2 sectors hovering around the $25,000 a day mark for this year so far, the market has, at last, come good.

Ian Middleton, Former Tanker Correspondent

March 11, 2015

1 Min Read
Kalyakan - stock.adobe.com

Earnings in the second half of last year were at levels not seen since 2008. But for how long will the good news continue?

The theory was that expanding refinery capacity in the Middle East would support the products sector. And on the back of that belief, and weak crude tanker earnings, considerable investment has been committed. 2013 saw 54 LR2 orders compared to 38 ordered in the previous five years, and last year 28 more were added according to London broker EA Gibson.

Already 17 LR2 and 12 LR1 orders have been placed this year. Nevertheless the sector remains the smallest tanker orderbook at around 12.5% of the existing fleet. A minimal investment in dirty products tonnage in recent years has helped offset these new orders, and a migration of LR2s into the dirty market has helped the clean LR2 sector.

Once the two 400,000 barrels per day (bpd) Yanbu and Ruwais refineries get up to speed this year, demand is expected to grow further, says Gibson.

However the medium term is more uncertain. The planned start-up of the 400,000 bpd Jazan refinery, due 2016, is expected to be delayed for a year, and if orders continue to be placed at current levels, by the end of the year numbers in each segment will be at record levels.

Meanwhile, on the demand side, exports of oil, LPG, and oil products from the US continue to grow, despite the fall in oil prices making some shale projects unsustainable, reaching almost 5m bpd in December last year according to the US Energy Information Administration.

About the Author

Ian Middleton

Former Tanker Correspondent

Ian Middleton is former editor of Tanker Trends, and before that of both Seatrade magazine and Seatrade Week. After having begun his career with a leading UK newspaper chain, Ian joined Seatrade in the late 1970s, allowing him a ringside view of the up's and down's of the shipping business from the 1980s slump onwards.

With his specialist knowledge of the tanker market, Ian is one of Seatrade's most experienced writers and a practised conference speaker and moderator.

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