Product Tanker Contracts Skyrocket of 337% in early 2023

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Credit: Petrobras

The product tanker orderbook to fleet ratio has surged from 5.4% in December 2022 to 9.3% in June 2023, driven by a remarkable 337% y/y rise in contracting during the first half of this year. By June 2023, product tanker contracting reached 8.9 million DWT.

LR2 Ships Significance

While the contracting of MR and LR1 ships saw notable growth, it was the LR2 ships that displayed the most significant increase. 5.6 million DWT of LR2 ships have been contracted, adding to an orderbook that is now equivalent to 21.6% of the current LR2 fleet.

The contracting of ten LR1 ships this year should also be highlighted, as no ships in this segment had been contracted since 2018. The product tanker fleet has been gradually aging over the past ten years, and the average ship is now nearly 13 years old.

Freight Rate Boosting

The war in Ukraine, and in particular EU’s ban of Russian oil products, has caused an increase in product tanker demand, resulting in higher volume shipped and longer sailing distances.

The ships contracted this year are scheduled to be delivered in 2025 and 2026. The impressive pick-up in contracting this year could begin to slow down in the medium term.

The International Energy Agency estimates that oil demand could peak already in 2028, which would limit further fleet growth.

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Source: Bimco