High LNG prices and rising temperatures could support suezmaxs, aframaxes and MRs in the coming month, Barry Rogliano Salles (BRS) speculated in a note on Monday.
The French shipbroker said demand for cooling as summer kicks into gear would push countries in the Middle East and South Asia to flip to fuel oil, a trade currently supporting suezmax and aframax rates and could mean a further boost for MRs.
The outfit said India, Pakistan and Bangladesh have turned away from fuel oil recently and toward LNG to cut emissions, while many Middle Eastern countries burn domestic natural gas and oil for power.
Both could use fuel oil, especially in the Middle East.
“This hypothesis is based on today’s extremely tight crude market and that we anticipate Opec’s members to maximise their crude exports (and therefore revenues) amid the ongoing Opec+ supply deal,” BRS said of a potential Middle East switch.
The market is further impacted by Russia's invasion of Ukraine, with Russian exports to Europe and the US plummeting with replacements coming from the Middle East and Russian fuel oil now headed to Asia and the Middle East.
BRS said much of the reshuffled fuel oil cargoes have been taken off MRs and put on suezmaxes and aframaxes, boosting tonne-mile demand for the two larger tanker classes.
But those MRs could come back into the trade, the broker said, with some developing countries possibly turning to Russian fuel oil.
“If this was to occur and Russian fuel oil was increasingly exported to Africa and Latin America, this would lend some tonne mile support to dirty MRs as we consider these smaller tankers best placed to carry fuel oil for intra-Atlantic basin voyages,” BRS said.
Suezmaxes and aframaxes rallied in the wake of February’s invasion, with uncertainty boosting earnings for both to over $90,000 per day.
In the ensuing months, though, rates have moderated, with the Baltic Exchange assessing time charter equivalent rates for suezmaxes at $21,552 per day on Monday and aframaxes at $24,395 per day.
Product tanker earnings remain strong, however, with the vessels benefitting from refinery closures adding tonne miles.
On Monday, MRs in the Atlantic were earning $45,017 per day, while Pacific MRs fetched $60,466 per day.
