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Oil Product Tankers Outperform Crude Tankers

As U.S. diesel prices soar, U.S. exports continue to rise significantly on skyrocketing demand, refined oil product tankers are now outperforming crude tankers, which continue to operate below their break even point, according to FreightWaves. 

While crude oil tankers are benefiting in regions affected by Russia’s war on Ukraine, such as the Black Sea, the Baltic Sea and the Mediterranean, overall, “the crude markets have been balancing new longer trade routes with the inability of OPEC to meet quotes, Russia offline and China lockdowns,” FreightWaves cited Evercore ISI’s Jon Chappell as saying. 

While Chappell thinks that crude tankers will “eventually” catch up, right now, it’s all about product tankers hauling refined oil. 

TradeWinds cites analysts at Clarksons Platou Securities as saying that tanker stock valuations have risen by nearly 50% so far this year, with freight rates doubling from Q1 to Q2. 

According to Lloyd’s List, refined oil products tanker transport is expected to grow at an average rate of 9.5% between 2021 and 2023. 

LR2 product tanker rates have reportedly jumped $17,000 per day on soaring European demand, according to Tradewinds, while MR tankers were already seeing 60% jumps in rates to as much as $56,000 per day in mid-April.

According to Clarksons Platou, modern-built MRs are now bringing in about $49,800 per day in the spot market–more than four times last year’s average rate, noting that the break even rate is $18,000, Freight Waves reported. 

Earnings for product tanker companies have not yet necessarily caught up with this overperformance, however, but Q2 results could tell a much different story. 

Bermuda-based Ardmore Shipping Corp. (ASC) on Wednesday reported a loss of $7 million (23 cents per share) in its first quarter, but still beat Wall Street expectations with revenue of $63.4 million–nearly double the Zacks survey of $33.6 million. 

By Charles Kennedy for Oilprice.com

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