The product tanker fleet has been gradually aging over the past ten years, and the average ship is now nearly 13 years old.

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.

This has boosted freight rates and a rise in contracting new ships.

By June 2023, product tanker contracting reached 8.9 million dwt. This means that more product tankers were already ordered in the first half of 2023 than during all of 2022. 

BIMCO’s analysis showed the product tanker orderbook to fleet ratio has increased from 5.4% last December to 9.3% in June 2023, driven by a 337% year-on-year rise in contracting during the first half of this year.

Although the contracting of MR and LR1 ships surged significantly, it was the LR2 ships that displayed the most significant increase.

So far this year, 5.6 million dwt of LR2 ships have been contracted, adding to an orderbook that is now equivalent to 21.6% of the present LR2 fleet, says Bimco´s Shipping Analyst, Filipe Gouveia.

“The contracting of ten LR1 ships this year should be highlighted, as no ships in this segment had been contracted since 2018. The ships contracted this year are scheduled to be delivered in 2025 and 2026. Until then supply growth should be limited and freight rates should be mainly affected by demand factors,” the shipping analyst added.

The impressive pick-up in contracting this year could however 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.

As such, new contracting may focus on replacing the aging fleet and on reducing greenhouse gas emissions.