Clean-to-Dirty

Clean to dirty switching first gathered pace in the fourth quarter of 2025 with recent geopolitical developments further accelerating dirty ups in recent months. With the outbreak of war paralysing the Middle East Gulf, approximately 2.4mbd of clean products have been removed from the tanker the market. With regional crude exports and refining activity subdued, tonnage fled the East in a mass exodus toward the Atlantic Basin in search of employment.

In the West, a significant operational shift occurred as owners dirtied-up coated LR2s to capture soaring returns in the dirty segments. This trend accelerated in April as TD25 spot earnings spiked to an average of $153,250/day (eco), up from $85,750/day in February. While clean rates also strengthened, they lagged significantly behind; TC15 spot returns (via Cape) averaged at $81,750/day in April, compared to just $27,000/day in February. Demand was underpinned by a surge in US crude exports, bolstered by wide open arb and strategic reserve releases, which fuelled the TD25 route, whilst simultaneously increasing Aframax shuttling requirements for VLCC reverse lightering. The return of Venezuelan crude to the mainstream market further tightened regional demand, with total export volume to US Gulf hitting 485kbd in April, up from 280kbd in January.

Beyond the Atlantic, the Pacific served as a secondary refuge. After discharging Middle Eastern naphtha in Asia, many owners faced a dearth of clean export options and chose to dirty up for the Transpacific trade. This shift saw vessels competing for TMX cargoes out of Vancouver or ballasting as far south as Argentina to capitalize on debottlenecked export facilities.

However, the narrative took a sharp turn in the latter half of April. The share of the coated LR2 fleet engaged in dirty trades had reached approximately 52.5%. This, combined with an influx of Aframax tonnage from the East and the easing of seasonal weather delays has seen rates “collapse” towards pre-War levels, albeit still at historically high levels.

Looking ahead, the prospect of these dirtied-up LR2s returning to the clean trades remains limited. Even if transit through the Strait of Hormuz is reinstated, the physical damage to Middle Eastern refineries suggests a slow recovery in CPP export volumes, meaning that fewer LR2s are required until export volumes fully recover. However, it is also important to note that cleaning up a dirty LR2 incurs cost and is not as easy as switching into dirty trade. As such it may take some time for LR2s to clean up and reposition West, if and when Hormuz normalises, potentially adding upside volatility to LR2 rates.

Looking back West, a critical variable remains the Mediterranean and Black Sea. Russian crude and fuel oil exports have continued to decline following Ukrainian attacks on processing facilities. While the European Union recently kept a full maritime services ban on Russian crude on hold, any reversal of this policy would alter the market dynamics. Such a ban would immediately push G7-compliant tankers out of Russian trades, likely creating a short-term supply glut in conventional markets. However, this would eventually be countered by a gradual migration of tonnage into dark fleet.

Aframax demand could also come under pressure from lower Mexican exports where declining production and stronger domestic refinery demand is impacting exports, though rising Venezuelan production and the potential for higher Kurdish volumes from Ceyhan could offset any Mexican declines.

Perhaps the most daunting chapter of this story lies in the looming supply pressure. 83 LR2/Aframax newbuilds are slated for delivery throughout 2026 — a level of fleet growth not witnessed since 2009. Unless clean trading volumes recover rapidly, the disparity in earnings is likely to trigger even more dirty-up activity, creating a cascading effect that could ultimately drag down Aframax earnings as well, leaving the industry to navigate a high-supply, high-uncertainty environment for the remainder of the year. That being said, the sector has shown remarkable resilience in recent years, and may continue to surprise to the upside.

LR2 Trading Status (no)

Crude Oil

East

The AG/Red Sea VLCC market opened the week with limited activity and rates broadly unchanged, while ongoing US/Iran tensions continued to create uncertainty in the region. A few reports of ships being hit kept sentiment cautious, although tonnage availability remained strong. As the week progressed, activity picked up in the region, though weaker TD3 paper put pressure on freight, leaving charterers in a stronger position. Later in the week, hopes around easing tensions and a potential reopening of the Strait of Hormuz helped stabilise sentiment, but activity remained subdued. Owners are still waiting for a stronger flow of enquiry to regain momentum.

Geopolitical uncertainty continues to dominate Suezmax sentiment in the AG as the market closely monitors developments between regional states and Iran. Local enquiry remains limited, although several owners are opting to maintain positions within the region rather than ballast away, awaiting further clarity on developments and any potential impact on regional trade flows.

The Asia Aframax market continues to soften amid sluggish demand. Several new requirements have emerged for the third decade of May, though these are unlikely to be sufficient to absorb the tonnage overhang and arrest the softening trend. TD14 extended its decline, breaking below WS230, reflecting mounting pressure from an oversupplied tonnage list. However, a few condensate requirements from Australia to East for similar dates in the third decade of May have also surfaced, offering a potential silver lining for owners. The Vancouver East market has followed the downward trend, correcting further, most notably breaking below $5m, with several fixtures repeating in the high $4m range. Meanwhile, earnings in the Atlantic have dropped significantly this week, making owners less willing to ballast on speculation. We close the week on a softer note, assessing the Indo/North route at 80kt x WS240.

West Africa

The WAF VLCC market remained broadly steady for most of the week, with limited enquiry reported. The tonnage list stayed balanced, although the region still needs to attract more ballasters from the East to support activity. Early in the week, rates were mostly unchanged, but sentiment improved slightly as USG activity firmed on the other side of the Atlantic. Rumours of stronger WAF/East numbers also helped owners push for higher levels. However, without a clear surge in enquiry, the market remains firm but needs a fresh test.

The West Africa Suezmax market opened on a softer footing, with additional pressure from eastern ballasters and continued political uncertainty weighing on sentiment. Activity from the USG and Guyana remained steady throughout, helping to keep Atlantic positions moving. Midweek, a fresh wave of enquiry ex-WAF improved momentum, tightening prompt availability and pushing TD20 levels back north of WS200.

Mediterranean

The CPC market continues to trade firmly, with prompt Suezmax tonnage remaining tight as units benefit from limited natural replacement and steady enquiry through the month-end programme. Rates have continued to strengthen, with highs of WS260 currently on subjects, while the market now awaits June stem confirmation and the opening fixing window for further direction.

A slow week for Aframaxes in the Med, with external influences dampening sentiment before rates had a chance to be tested. Inevitably, when the cargoes came – and with TD25 shedding over 130 WS points week on week – rate reductions were a given; the question then became “how much?”. With tonnage forced to compete, WS240 (at time of writing) for a fairly healthy flat rate suggests there is more yet to come out of the market, especially when Ceyhan gets tested next. Heading into next week, the market will continue to search for a floor, as the industry looks ahead to the next geopolitical catalyst.

US Gulf/Latin America

The States VLCC market started the week on a quieter note, with limited USG activity and rates initially on the softer side. A later surge of activity brought more attention to the region, with visible confirmation on USG/East levels. Outstanding cargoes remain in the USG, which has helped sentiment firm slightly. Tonnage availability remains fairly healthy, with some ships opening in the Continent, but owners will look for continued enquiry to maintain momentum into next week.

North Sea

A fairly decent chunk taken out of the North Sea Aframax market this week, with surrounding markets also feeling the sting. We are still seeing an exodus of ships heading over to the States, as even with the ballast the TCE still looks more attractive if you hit your dates. Local sentiment is pretty soft, with some thinking there is more to come. Our view is that the market remains broadly flat in the short term, with bread-and-butter business trading around WS200. Can we expect more ships to ballast west? This seems less likely given the general cooling West of Suez.

Crude Tanker Spot Rates (WS)

Clean Products

East

The Red Sea has seen the action this week on both LR2s and the LR1s, however, given the supply of tonnage there has been a slight dip on rates for the LR2s heading to the UKC with $5.05m on subs. The LR1s have remained pretty steady, circa $1.1m levels on subs for shorter red sea voyages. Still no sign of the situation in the AG improving as this blockade continues.

It’s been a fairly active week in the MR market with cargo volume emerging from Sikka. Two TC17 cargoes remain outstanding, while a further three are currently on subjects. Rates on the route have softened slightly, with WS410 repeated three times after opening the week at WS420. Sikka continues to dominate as the primary loading area, with cargoes reported bound for both the Red Sea and the USWC at $3.35m. Meanwhile, a Mumbai–Japan fixture has also been reported on subjects at WS315.

Friday saw two vessels placed on subjects for cross-AG voyages, although rates had not been disclosed at the time of writing. With geopolitical uncertainty still weighing on the market, cargo concentration has increasingly shifted toward Sikka. Market participants remain focused on the prospect of a peace deal, which could potentially lead to the reopening of the Strait of Hormuz.

UK Continent

The MR tonnage displacement factor Atlantic basin versus the East has reached an unfavourable tipping point for rates. As tonnage arrives, we are now seeing WAF export cargoes receiving 8 offers and we have seen USG rates collapse. This has sent some tremors across the whole region and the UKC has not been immune. TC2, although active with the arb open, has seen a low of WS207.5, whilst WS215 is also on subs. UKC-WAF rates have edged down to WS340 and is now probably one of the best paying routes out there. It’s not full panic yet, but owners are now jumping on what they can as soon as they can in order to secure better paying voyages. There is also a lot more fix, failing as the market jitters are back.  

A week which has offered very little fixing opportunities for Handies plying their trade in the North as supply continues to outweigh demand. TC23 freight closes around the 30kt x WS380 mark, with 30kt x WS385 the latest paid albeit for a prompt laycan. The weekend break and vessel restocking come Monday won’t help owners fight here as they will be on the backfoot for the short-term.

Med

It has been a running theme throughout the week that short-haul offered better returns for owners, with differentials skewed upwards. Thus the pressure has not really been on the base Med-TA rate but more on the routes that surround it. We have seen TA discounted, but now owners’ prospects aren’t guaranteed on TC14 as the round trip economics have dramatically changed, with the USG softening, so there is some reflection around TA runs. Some activity to close the week leaves the list patchy with charterers looking forward to the weekend restocking, which will likely hit the West-Med first, as we see the return of the WAF ballasters.  

The wider market bearishness has taken its toll on Med Handies, with rates falling WS50 points to 30kt WS400 levels – aided by a healthy list and staggered enquiry. Pending how the list looks come Monday, charterers could be in positions to further pile on downward pressure, whilst owners will be hoping for some fresh enquiry, which could solidify current levels as the new floor.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Enquiry was slow to surface across both regions following the UK bank holiday, with minimal activity seen on Monday and Tuesday before enquiry slowly began to trickle into the market. The North initially saw levels fixed at 30kt x WS430 each on a more vintage vessel and a non-standard Handy running at a discount to the market, before levels were once again restored to WS435 for a standard vessel and run. The list remains tight overall for naturally placed ships, with owners looking to keep the pressure on despite generally sluggish enquiry.

The Med has seen a steady week all in all, despite a slow start, with ships beginning to populate the list and provide some options. However, a late runner saw its replacement fetch 30kt x WS430, helping owners to hold the line as enquiries steadily picked off ships in the fixing window, with one notable exception of WS440, which raised some eyebrows. We do not expect to see these levels repeated as we head into next week. Tonnage shows ready for the next fixing window, where levels could come under pressure if enquiry is slow to surface.

MR

The North saw the better of the two markets this week in terms of activity, with a couple of ships picked off early into the proceedings at 45kt x WS330 and then 45kt x WS322.5 for a reload off vessels dates coming at an understandable discount. Naturally placed tonnage remains tight, and we expect to see owners push on rates when next called upon. In the Med, there has been very little full-stem enquiry over the past week, with owners finding their employment via Handy cargoes. Availability is on the tighter side for now, but a steady feel remains with rate expectations of WS340 on next done.

Panamax

This week has seen the Panamax market in the USG and Caribs continuously correct downward, with TD21 printing at WS549.17 before levels began to fall sharply, with our market call of 50kt x WS350 come Friday. Enquiry has been muted for some time as vessels began to pile up and sit ready for cargo, creating pressure, especially with the Aframax market softening in tandem and providing favourable options for charterers. With surrounding markets expected to be nearing the bottom, there is perhaps some light at the end of the tunnel for this sector, but for now rates are under pressure and sentiment stays soft. Over in the Med and Continent, we still await a well-publicised fresh test of levels needed to determine a new benchmark. Ideas range for now, but with Aframaxes on the weaker side for transatlantic runs, this should in theory keep the Panamaxes competitive for unrestricted ports.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)

wk on wk changeMay 7thApr 30thLast Month*FFA Q1
TD3C VLCC AG-China WS51459408444434
TD3C VLCC AG-China TCE $/day58,000485,250427,250468,000448,750
TD20 Suezmax WAF-UKC WS-17196212296218
TD20 Suezmax WAF-UKC TCE $/day-9,75088,25098,000155,75094,750
TD25 Aframax USG-UKC WS-142292434616355
TD25 Aframax USG-UKC TCE $/day-52,50075,000127,500199,50092,250
TC1 LR2 AG-Japan WS-2551553532 
TC1 LR2 AG-Japan TCE $/day-1,750157,250159,000152,000
TC18 MR USG-Brazil WS-201315516641416
TC18 MR USG-Brazil TCE $/day-34,25037,00071,25095,00052,500
TC5 LR1 AG-Japan WS-13604616555460
TC5 LR1 AG-Japan TCE $/day-4,000124,750128,750113,75087,000
TC7 MR Singapore-EC Aus WS-19355374321294
TC7 MR Singapore-EC Aus TCE $/day-4,00040,50044,50035,50028,750

(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis

Bunker Prices ($/tonne)

wk on wk changeMay 7thApr 30thLast Month*
Rotterdam VLSFO  +5801796658
Fujairah VLSFO  +55938883786
Singapore VLSFO  +25825800808
Rotterdam LSMGO  -18511591,3431,231

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