The outlook for the LR (Long Range) tanker market is shifting from a period of tightness to one of normalizing supply, according to recent analysis. This change isn’t driven by a single factor, but by a combination of increased vessel deliveries, a potential decrease in vessels switching from clean to dirty oil trades and the possibility of more direct routes through the Suez Canal.
Clean Fleet Growth and Deliveries
More than 50 LR deliveries were absorbed in 2025 due to vessels shifting into dirty trade and routing inefficiencies caused by using the Cape of Good Hope. However, 2026 is expected to see the highest number of LR deliveries on record. Since January, 13 LRs have already been delivered, with around 75 more scheduled for delivery throughout the year, and roughly 65 still to come. This influx of fresh vessels is expected to create a consistent supply increase.
The Shifting Dynamic of Clean-Dirty Trades
In 2025, a significant number of LR2 vessels moved into dirty employment, relieving pressure on the clean market. However, this trend appears unlikely to continue at the same pace in 2026, as trading dirty is becoming less attractive to owners.
Why the Dirty Option is Less Compelling
The attractiveness of dirty trades is linked to the sanctions market and vessels moving into dark fleet employment, but the pace of this shift has slowed. The return of CPC barrels may reduce the require for long-haul voyages, lessening support for Aframax earnings. While Venezuela to PADD3 remains a constructive flow for Aframax, increased liftings to India are better suited for Suezmax and VLCC vessels. If Aframax earnings decline while clean LR2 rates remain workable, the incentive to switch to dirty trades will diminish.
Suez Canal and Routing Efficiency
A return to using the Suez Canal for tanker transits remains uncertain, with over 100 days having passed since the last reported attack. While Maersk has signaled a willingness to route some container services through the Canal, tanker owners have not followed suit, citing asset risk and ongoing tensions. However, a de-escalation of geopolitical issues could lead to a gradual return to Suez transits in the second half of the year.
If LR East to West voyages revert to the Suez Canal, liftings would need to increase by around 74% to offset the reduced voyage distances. However, clean product flows are constrained by refinery run rates, and a significant increase in East to West volumes is considered unlikely.
Fleet Age and Scrapping
LR2s are generally younger than LR1s, limiting natural attrition. Scrapping is unlikely to keep pace with deliveries, as most of the fleet remains commercially viable. Older LR tonnage is still active, but its employment is becoming more segmented and increasingly domestic. Voyage counts have risen across age brackets, with a bias toward dirty voyages. Vessels over 20 years are heavily skewed towards domestic trading.
Refinery Impact
Net refinery additions in 2026 are concentrated in the Pacific Basin, potentially leading to increased Asian output and exports. Refinery closures in the Americas could too support longer-haul repositioning moves. However, these changes are unlikely to significantly alter overall clean trade flows.
Looking Ahead
The LR market is transitioning to a phase of supply normalization. The high delivery schedule, reduced incentive for dirty trades, and potential for Suez Canal transits are all contributing factors. While demand isn’t collapsing, the balance of risks is shifting towards softer freight rates as supply improves and routing efficiency increases.
Frequently Asked Questions
What is driving the shift in the LR tanker market?
A heavy newbuild delivery schedule, a potential decrease in vessels switching from clean to dirty oil trades, and the possibility of more direct routes through the Suez Canal are driving the shift.
Will older LR vessels be scrapped to balance the market?
Scrapping is unlikely to keep pace with deliveries, as the bulk of the fleet remains commercially usable, and older vessels are increasingly focused on domestic trading.
How could a return to Suez Canal transits impact the market?
A return to Suez transits would reinforce the easing of supply by shortening voyage durations, but would require a significant increase in liftings to maintain current tonne-mile demand.
How will the evolving refinery landscape affect LR tanker demand in the coming months?
