The exemplary earnings in the crude oil tanker sector has cascaded down into the product tankers market in a week that saw traders scrabble to secure tonnage to take advantage of the tidal wave of crude and products flooding the market
Fear of missing out is a very real anxiety in the product tanker market. Storage activity is a tiny part of the product tanker scene and would normally barely merit a mention. Compared to the crude oil tanker market, the product tanker market has a variety of inefficiencies built-in. Multiple cargo types with their own demand curves to port congestion and logistical bottlenecks. To a large extent, some of the Covid-19-driven fall in demand would have been absorbed to some extent by the slack in the product tanker sector.
Instead, the product tanker market saw a comparatively massive removal of product tankers from the available fleet by traders looking to store products. According to VesselsValue data, between 1 April 2020 and 27 April 2020 nine product tankers have been booked for storage. In the same period of 2019, there were none listed as chartered for storage duties.
The impact has sown fear among traders and a run on available units last week that for many may be a once in a lifetime event. Inevitably some of the more outlandish fixtures reported failed on subject (to board approval) but for many, it was an hour-by-hour tumbling of record rates. According to Clarkson Research Services, the US$167,000/day, time charter equivalent (TCE) earnings for LR2 tankers on Middle East Gulf to Japan is double the previous record.
MR2 tankers had a very enjoyable week, too, with the Middle East Gulf to East Africa single voyage route leapt from WS 230 at the start of the week to finish on WS 530 on 24 April 2020, a TCE of US$82,000/day. That was a week-on-week increase of nearly 160%. To put this into context, US$82,000/day is ten times the average TCE earnings in 2018 on this route.
On the storage side, VesselsValue reported the 114,000-dwt LR2 tanker Torm Hilde was fixed by Clearlake for six months storage work at a very firm US$55,000/day. In its 2019 annual report, it notes that Torm LR2 tankers earned an average of US$19,730/day. Earnings in Q2 2020 will be considerably different.
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