Fortunes in the LR2 product tanker market could be better. In its latest weekly report, shipbroker Gibson said that “it’s safe to say that LR2s have had a pretty torrid year to date, with earnings on the benchmark Middle East – Japan route averaging around $8,000/day in the second quarter, barely enough to cover fixed operating expenses. Many point to fleet growth as the primary issue, yet the trading LR2 fleet has remained fairly static, indicating that new deliveries are not the overriding problem. Whilst the overall LR2/Aframax fleet has seen substantial growth, with 53 vessels delivered in 2016 and 40 already for the year to date, the actively clean trading LR2 fleet size has remained stable at just under 200 vessels. Last year we counted at least 25 LR2s migrating into dirty trade, whilst many vessels went dirty on, or straight after their maiden voyage. The situation is of course dynamic, with owners having the option to clean up their tonnage if the LR2 market begins to show signs of sustainable returns. However, right now there appears little impetus to favour one market over the next”.

The shipbroker added that “on the demand side, getting a complete and truly accurate picture in the short term is challenging, with data sets subject to constant revision and often time lagged. However, export volumes out of the Middle East have been clearly pressured this year. Limited capacity additions have come online, whilst the Ruwais plant has seen at least 127,000 b/d taken offline following a fire, not to mention the Emirate stockpiling product to offer security against a potential interruption to gas supplies from Qatar. Lower export volumes from Saudi Arabia were also observed over the first half of the year. Combined with the UAE, it is possible that regional exports have slipped nearly 300,000 b/d”.