Middle East-Japan LR2 rates rise above w150 for first time in 2018

LR2

The East of Suez Long Range II tanker rates Thursday hit their highest level for the year as a supply squeeze prompted charterers to rush in to cover their requirements for mid-December loadings, market participants said.

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Sign Up The rates for the key LR2 Persian Gulf to Japan route have surged by over 30 Worldscale points in the span of just three days, brokers said, citing the latest fixtures heard.

Just a week ago, on November 23, fixtures for this route being done around w119 but in the last few days, fixtures have been reported at w130, w140, w150 and above in quick succession.

“The market is volatile, shout another high number and see if it gets fixed,” a source with a clean oil tankers’ owner said.

With several ships being taken to move gasoil and jet fuel cargoes to Europe, the supply has been drying up in the Middle East, sources said. At the same time, many ships returning from North Asia to the Middle East has been delayed because they have cargoes to move on back haul routes within the East Asia and Pacific region.

There are hardly three or four ships available for loading from now until mid-December, the brokers said. As a result, those who require to move cargoes, have no choice but to pay higher rates.

The discount that the LR2s have traditionally enjoyed over the LR1s on the Middle East-North Asia routes, in terms of Worldscale points, has also disappeared. LR2s are now commanding a premium of up to w17.5 points, market participants said.

“With the LR1s stable and the LR2s spiking, the discounts and premiums have flipped,” a chartering source said.

Many charterers have not been able to split their cargoes to take the cheaper LR1s and MRs either, due to the logistical hassles involved.

“It seems only a few of the charterers can split their cargoes and this is the reason why many took LR2s overnight,” another chartering source said.

Among the latest fixtures, the Bahra was placed on subjects by Total at w150 and the Front Capella by Marubeni at w152.5 for naphtha loading around mid-December in the Persian Gulf, sources said.

Formosa is seeking an LR2 for naphtha loading in the Persian Gulf around December 20, they said.

Source: Platts

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