Atlantic MR Balance to Tighten as Eastbound Flows Dominate
R ballasters in the Atlantic Basin have remained broadly rangebound, even in the post-war environment. This reflects largely offsetting vessel flows: while MRs in the Atlantic Basin have been fixing cargoes for voyages into the Pacific Basin, this has been counterbalanced by a steady flow of vessels ballasting back from the Pacific to the Atlantic. As a result, overall availability has not recorded extreme values. In contrast, LR inflows into the Atlantic Basin have been more visible, due to the loss of Middle Eastern employment in an otherwise traditional loading region for these tankers.
Against this backdrop, the rally of MR freight rates in the Atlantic are showing early signs of plateauing, especially out of the US Gulf. This is mainly driven by the recent increase in ballast arrivals into the region, which has eased near-term supply tightness.
Looking ahead, however, current long-haul positioning suggests a shift in this balance. MR flows are increasingly skewed toward the Pacific, with more vessels heading east than returning westbound. Based on observed movements, this is expected to result in a net reduction of approximately 30 MR tankers in the Atlantic Basin, with a significant portion of this adjustment likely to materialise over the next 20-30 days.
This will ultimately point to a decline in Atlantic MR availability at the lower levels of the range, while LR tonnage is expected to remain broadly balanced on a net basis. Should CPP export volumes continue at a steady pace toward similar destinations, the underlying demand profile could continue to support clean freight.
The tightening of MR availability on this new norm of longer-haul routing could also trigger a shift to the employment of bigger vessel classes out traditionally MR dominated-origin regions. From a trading perspective, as the initial urgency to move barrels following the Strait of Hormuz closure fades, and with margins coming under pressure, the cost advantage of larger vessels could become more compelling, as these offer lower freight costs through economies of scale.
For LR2s, the continuous easing in competitive pressure, driven by clean tankers shifting into the dirty trade, appears to be approaching its limit. LR2 earnings have now moved above Aframax returns, materially reducing the incentive for further switching. Consistent with this, there is currently no observable crude/DPP fixtures of LR2 vessels located in the Pacific that are ballasting to the Atlantic.
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