Charterers switch to Suezmaxes for Persian Gulf middle distillates to UK Continent

A spike in rates for Long Range 2 product tankers for shipping middle distillates from the Persian Gulf to Northwest Europe has led to charterers shifting to larger, Suezmax tankers, market sources said Tuesday.

With Middle East refiners ramping up middle distillate production, charterers have run out of options to hire LR2 tankers, after the Yasref refinery sold five LR2-sized parcels of ULSD for the loading window of July 29-August 7, sources said.

“Charterers are doing everything they can to avoid fixing LR2s, and at least two LR2 stems went on Suezmax tankers,” said a Singapore based broker.

Shell fixed the Novo for a Persian Gulf to UK Continent voyage, loading August 10-15, at $4.75 million. Sources said the total cargo was 140,000 mt and a combination of gasoil and jet fuel.

BP had fixed the Atina to lift 120,000 mt of ULSD on a Yasref-UKC voyage, loading August 5-6, at $4.2 million, sources said.

Over the last month, the LR2 PG-UKC rate had climbed sharply to $3.95 million from $2.9 million, Platts data show.

The highest rate an LR2 obtained for a Yasref-UKC voyage was $4 million, fixed by Noble on the LR2 Polaris for a July 29 loading cargo, $200,000 less than the rate obtained on the Atina, said market sources.

Long Range 3 is the name given to Suezmax tankers with epoxy-coated tanks shipping clean petroleum products, shipping sources said.

New-build Suezmax tankers have been used before to ship middle distillate such as gasoil from South Korea to the West as their first cargo, and Suezmax shipowners said unsuccessful attempts have been made previously to combine cargoes for an LR3 fixture.

Market sources said such a large cargo was not only difficult to put together but also difficult to discharge, as there are a limited number of ports where a Suezmax can discharge, and the cargo would likely have to be lightered off.
Source: Platts