Oil Product Tanker Rates Fall from Pinnacle (but Remain High)

WORLDWIDE – BIMCO’s shipping number of the week reveals freight rates for oil product tankers have returned to more ‘normal’ levels following a spike in late April when rates across all ship sizes reached record highs. Large Range 2 (LR2) earnings peaked at $169,829 on 27 April on the benchmark Naptha condensate trade from the Middle East to Japan.

Rates have since fallen to $45,459 per day on 19 May however this remains considerably above the average earnings of $18,786 per day in 2019 and remain high given the collapse in the global oil demand caused by the coronavirus crisis. The spike in rates in late April brought an end to a period of rates steadily increasing since the end of February. LR2 vessels are those between 80,000-159,999 dead weight tonnes.

One factor in the rates fetching to such a high came on the back of increased demand for storage as well as tonnage being held up due to delays in ports. Furthermore, even as demand collapsed, some refineries were slow to adjust their production levels with unneeded oil products being pushed onto the market.

So what of the future? BIMCO sticks its neck out a little and predicts that now, past those heady highs, it expects freight rates to remain low for the remainder of the year as the lower underlying demand becomes unavoidable. That analysis is supported by the recent International Energy Agency (IEA) forecast that global oil demand will fall by 8.6 million barrels per day in 2020.