Mideast Gulf clean tanker freight rates climbed to record highs on 14 October across Long Range (LR) 2, LR1 and Medium Range (MR) vessel types, as tight vessel availability and the shift of clean tankers into the dirty petroleum product (DPP) trade further tightened the market.
LR2 and LR1 rates from the Mideast Gulf to Japan reached Worldscale (WS) 995 ($225.37/t) and WS980 ($221.97/t) respectively, on 14 October, the highest since Argus began assessing the route in November 2005, and remained at those levels on 15 October. The corresponding MR rate on the route climbed further to a record high of WS970 ($217.38/t) on 15 October, surpassing the previous high of WS882.50 ($197.77/t) set a day earlier and marking its highest level since Argus began assessing the route in December 2017.
Vessel supply remains very tight with limited options available to charterers, freight market participants said. Shipowners who do manage to find cargoes for their vessels are consequently pushing for higher rates, they added.
Robust crude tanker earnings have encouraged LR2 shipowners to dirty up in recent months, reducing available ships in the clean market just as Middle East product exports were recovering.
A total of 113 LR2 tankers switched from clean to dirty trades in January-August 2026, compared with 67 during the whole of 2025, according to a Singapore-based shipbroking analyst.
Mideast Gulf clean product exports rose above 3mn b/d in early September, with LR2 and LR1 loadings reaching 2.1mn b/d, according to Kpler.
A string of attacks in the Mideast Gulf region since last weekend has added to pressure on vessel supply, making some market participants reluctant to send their vessels into the region. Recovering cargo demand and heightened security concerns have consequently increased competition for available clean tankers in the region.
The switch to DPP trade has sharply reduced LR2 availability as crude Aframax earnings continue to significantly outperform returns in the clean LR2 market.
Aframax earnings remain around $200,000-300,000/d above LR2 earnings, according to shipping analytics firm Kpler, limiting the incentive for vessels to switch back to clean trades. The attractive earnings is likely to keep clean LR2 tankers in the DPP market for longer.
The tight LR2 market has also been reflected on westbound clean routes from the Red Sea and west coast India. Higher cargo availability from India, renewed European demand for distillates and persistent security risks in the Red Sea have supported rates, while the loss of LR2 ships to the DPP market has further restricted vessel availability.
The elevated LR rates are also prompting charterers to look for alternatives. Market participants have heard of charterers attempting to cover cargoes on MRs, although much of the current activity is being concluded off market, with details not disclosed.
Some charterers have also opted to split larger cargoes into multiple MR shipments, as the economies of scale typically offered by LR tankers have been eroded by the surge in freight costs.
Market participants expect the current shortage of LR tankers and resulting shift towards smaller vessels to support MR freight rates in the coming months.
