Asia LR2 tankers rise above w100 first time in 2021: sources

Singapore — Asia Long Range, or LR2, tanker rates rose above the key psychological mark of w100 for the first time this year on March 23, as tight tonnage sent charterers scurrying to cover their requirements and limited supply added to the bullish sentiment, market sources told S&P Global Platts.

Among the fixtures heard, Admic, the shipping arm of Abu Dhabi's state-run Adnoc, was heard to have placed on LR2 on subjects around w110 for April 8 naphtha loading on the Ruwais-Japan route, sources said. Earlier, Admic had chartered LR2s at w90, w97.5 and w100, indicating that rates are rising with every new fixture done, they said.

Admic executives could not be immediately reached for comment but several market participants said that the LR2 rates on the benchmark Persian Gulf-North Asia routes are now above w100. S&P Global assessed the PG-Japan route at w97.5 on March 22.

A source with an LR2 owner said that a fixture has been done at w110 on this route but the charterer is yet to be confirmed.

Lack of LR2s for loading in the Persian Gulf is serving as a catalyst, triggering nervous chartering interest, sources said.

The return of LR2s to the Persian Gulf after discharging cargoes in North Asia is getting delayed because they are getting backhaul cargoes within the region. This in turn is tightening supply in the Middle East.

There are hardly 20 LR2s currently in East Asia that are likely to return to the Persian Gulf within the next three weeks, said a broker in North Asia. The number does not include those LR2s, which currently have an uncertain itinerary. Nevertheless, this prospective supply is a far cry from last month when the number was at least 50 including a large number of "hidden and available" LR2s belonging to a major owner, which hand not been openly listed in the position list, the broker said.

The latest increase in rates has also narrowed down the premium which the LR1s are commanding over the LR1s. This premium was estimated at over 25 Worldscale points at the end of last week but is now closer to w17.5. Among the LR1 fixtures heard, Hafnia's Bw Kronborg was placed on subjects by PDC around w127.5 for April 4 naphtha loading in Mumbai and Persian Gulf, for Japan delivery, sources said.