Crude Production And Seasonal Tailwinds To Drive Product Tanker Strength

In this episode of Capital Link's Shipping Sector Webinar Series, we welcomed Mr. Carlos Balestra di Mottola, CEO of d’Amico International Shipping S.A. (DIS.MI) (OTCQX:DMCOF), Mr. Soren Steenberg Jensen, EVP, Head of Asset Management at Hafnia Ltd. (NYSE:HAFN) (OSLO: HAFNI), Mr. Robert Bugbee, President at Scorpio Tankers Inc. (NYSE:STNG), and Mr. Kim Balle, CFO – TORM S.A. (NASDAQ:TRMD) (Copenhagen: TRMDA). The webinar moderated by Mr. Gregory Lewis, Head of Maritime Research at BTIG, explored the current state and future prospects of the product tanker market, with panelists discussing market drivers and trends including production increases, geopolitical factors, and trade route dynamics. To watch the full discussion please visit the following link: https://www.youtube.com/watch?v=9Ox_hKxzHh4 Product Tankers Gain from Crude Market Momentum Contrary to some expectations at the year's end, the sector is experiencing one of its historically strongest periods, with MR tanker rates in key basins exceeding $30,000 per day. This environment gets a boost by a mix of geopolitical shifts, intertwined crude market dynamics, and enduring structural trends. The primary and most unexpected catalyst, according to Mr. Balestra di Mottola, is the "oil on the water" phenomenon. A sharp ramp-up in global oil production, rising by nearly 5 million barrels per day between Q1 and Q4 of 2025 and driven by the unwinding of OPEC cuts alongside increased non-OPEC output, has tightened the crude tanker market. This strength has spilled over into the product tankers segment as vessels have opted to "dirty up" to carry crude. Forces Shaping Tanker Supply and Demand Beyond this crude boost, structural demand trends continue to favor ton-mile growth. Mr. Steenberg Jensen pointed to refinery closures in mature markets like Northwestern Europe (including facilities in the UK and Germany), contrasted with new refinery capacity coming online in the Far East. This shift in refining geography increases sailing distances. Furthermore, Mr. Bugbee and Mr. Balle discussed that a big portion of the fleet engaged in sanctioned trades is aging and operating with inefficiencies. The consensus is that a quick resolution to the war in Ukraine and a lifting of sanctions is unlikely. Mr. Bugbee supports the idea that any change would be staggered and measured, and the longer it takes, the older and less viable for a return to conventional trade these vessels become. In turn, Mr. Balle reinforced that over one-third of the combined Aframax/LR2 fleet is already sanctioned, and these worn-out vessels are unlikely to ever return to the conventional market, representing a gradual but permanent removal of supply. Investor Value: Strong Balance Sheets and Profitable Charters Company balance sheets are healthier than they have been in years. This financial strength is translating into clear shareholder return policies. Scorpio Tankers, for example, aims for a conventional dividend raised through the cycle. Mr. Bugbee emphasized the value proposition for investors, noting a concrete case: an LR2 fixed on a 5-year time charter valued at roughly $50–53 million and earning about $22,000 per day in free cash flow, equates to an unlevered return of nearly $7.5 million annually. He added that public company stocks trading at a discount to the NAV of such assets, offer shareholders an even higher yield on their investment. Charter Market Momentum: Limited Supply, Rising Prices The period charter market reflects this confidence in cash flows. Mr. Balestra di Mottola noticed a lot of interest from counterparties for 2–3 year charters, considering that d'Amico has secured coverage at profitable rates. On the other hand, Mr. Bugbee noted that strong crude market conditions not only pull product tanker rates higher but also underpin confidence in longer-term charters, as evidenced by a recent 5-year fixture to a major oil company. Disclosure: Capital Link is the investor relations advisor to d’Amico International Shipping S.A. and works with Scorpio Tankers Inc. This content is for informational purposes only and not intended to be investing advice. The article includes statements made by company management during the sector webinar. Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.