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Today in Energy

December 14, 2022

Tanker rates for refined petroleum products reach multiyear highs during 2022

monthly medium-range clean tanker rates
Data source: Argus Media

Rates for petroleum product tankers that carry low-sulfur petroleum products, including refined petroleum products such as motor gasoline, diesel fuel, jet fuel, and naphtha, reached multiyear highs this summer. Rates for these tankers, known as clean tankers, remained elevated through November, driven largely by the effects of Russia’s full-scale invasion of Ukraine.

Historically, tanker rates increase when petroleum demand is low because tankers begin to be used as flexible, floating storage. In April 2020, an oversupply of crude oil and refined petroleum products, resulting from decreased demand during the COVID-19 pandemic, drove both clean and dirty tanker rates to record highs. Dirty tankers mostly carry crude oil, but they can also haul high-sulfur petroleum products such as residual fuel oil.

Clean petroleum products are typically transported on medium range (MR) tankers, which are generally smaller than dirty tankers. MR clean tanker rates rose above the previous record highs in April 2020 and remained elevated as of November 2022. Since February 2022, clean tanker rates have increased for ships operating in ports closely associated with Russia and Europe because of geopolitical uncertainty and high-risk insurance premiums. As tanker rates have increased, European countries have begun purchasing distillate from countries further away from Russia, and the longer voyage time has added to the cost of chartering a vessel, which has also increased the cost of shipping petroleum products.

Tanker rates for MR clean vessels on the Baltic-UK Continent route doubled between February and May 2022, reaching more than $36 per metric ton (mt) At the end of April, Rosneft (Russia’s second-largest, state-controlled oil company) announced that it would eliminate diesel exports from the Baltic port of Primorsk in May. Clean tanker rates on the Baltic-UK Continental route responded by rising another 22% between May and July, reaching $44/mt. In November 2022, the most recent data available, tanker rates for MR clean tanker vessels on the Baltic-UK Continent route were nearly $45/mt. To make up for less diesel imports from Russia, Europe has been increasing imports from other sources, particularly the United States, according to trade press and ship tracking services.

Dirty tanker rates for voyages originating in Russian seaports on the Baltic Sea (Primorsk) and the Black Sea (Novorossiysk) also increased significantly in the first four months of 2022. However, from April 2022 to November 2022, rates from Primorsk decreased by about 46% and from Novorossiysk by about 4%. Despite these decreases, rates were more than double in November than what they were in February.

Principal contributor: Josh Eiermann