S&P Global reports that TORM A/S cites the combination of the EU’s upcoming ban on Russian oil-products and heightened drone strikes against refinery infrastructure as key drivers bolstering product-tanker freight-rates.
According to the company’s Q3 interim financial report, geopolitical disruption and structural shifts in refining and shipping patterns improved ton-mile demand in the quarter. East-to-West trades and Atlantic-basin middle-distillate movements were particularly supported.
Key Market Dynamics
- The EU’s ban on imports of oil-products derived from Russian crude and US sanctions on major Russian refiners were flagged as adding “complexity and underpinning” to the tanker market.
- Drone strikes targeting Russian-refinery infrastructure reduced Russian refined-product exports by an estimated 300 000 barrels/day week-on-week and 100 000 b/d from October levels.
- Freight-rate benchmarks: TORM’s time-charter-equivalent (TCE) for Q3 averaged US$31 012/day, down 8 % year-on-year. Meanwhile, the Platts 90 000-tonne Persian-Gulf-to-UK-Continent clean-product rate averaged US$40.43/mt, down roughly 30 % year-on-year and below the five-year average of US$46.58/mt.
Structural Backdrop
- Trade volumes rose 4 % quarter-on-quarter and 2 % year-on-year in Q3, aided by capacity constraints from refinery closures in Northwest Europe and the US West Coast.
- While the product-tanker fleet grew nominally (~5 %), effective capacity for clean-products declined by ~1 % because vessels shifted into “dirty” trades and older tonnage remained active. Approximately ten fewer LR2 vessels were trading clean petro-products compared with a year ago.
- Segments impacted include LR2/Aframax trades: ~27 % of capacity is under US/UK/EU sanctions, and about half the fleet in some segments is over 20 years old.
Outlook for Freight Rates
TANKER-MARKET forward momentum is underpinned by a mix of geopolitical disruptions, shifting trade flows and constrained effective capacity. The clean-product segment can expect support from tight Long Range (LR) trades in the East and steady long-haul flows from the Mediterranean to Japan.
While current freight-rates remain below historical peaks, the structural tailwinds — namely sanctions, production disruptions and ton-mile demand growth — are strengthening rate foundations.
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Source: S&P Global
