The outlook for the LR (Long Range) tanker market over the coming quarters hinges less on a surge in demand and more on the increasing amount of vessel supply returning to the market. Factors contributing to this shift include a substantial newbuild delivery schedule, the reversal of recent clean-to-dirty switching, and the potential for faster turnaround times if East-West routes normalize via the Suez Canal.
Clean Fleet Growth is Accelerating
LR deliveries were readily absorbed in 2025 due to vessels shifting into dirty trade and continued routing inefficiencies via the Cape of Good Hope. However, the situation is changing, with approximately 13 LR deliveries already made this year and around 75 more scheduled for 2026, alongside roughly 65 still to come. This will steadily expand the clean LR pool throughout the year.
Clean-Dirty Switches
In 2025, over 50 LR newbuilds were delivered, but the clean market didn’t experience significant oversupply as a considerable number of LR2s transitioned into dirty employment, effectively reducing supply pressure. The likelihood of this occurring to the same extent in 2026 is diminishing, as trading dirty is no longer as attractive to owners.
Why the Dirty Option May Look Less Compelling
Aframax support has been linked to a tighter sanctions market and increased tonnage entering dark fleet employment. While dark fleet availability remains limited, the rate of vessels switching from mainstream trading to sanctioned trades has slowed. Additionally, the robust transatlantic crude program previously supported Aframax earnings, but with the return of CPC barrels, European refiners may require fewer long-haul Atlantic Basin voyages.
Venezuela to PADD3 remains a positive factor for Aframax, but the recent trade deal also allows for increased Venezuela to India liftings, which are more economically suited to Suezmax and VLCC vessels. Consequently, increased Venezuelan exports do not automatically translate to Aframax employment. If Aframax earnings decline while clean LR2 rates remain viable, the incentive to switch to dirty employment will lessen, potentially leading to further capacity remaining in or returning to the clean market.
When Will LR Owners Go Back Via Suez?
A return to tanker transits via the Suez Canal remains uncertain. Despite Maersk signaling a willingness to reroute some container services, tanker owners have not followed suit in a significant way, citing asset risk due to ongoing tensions between Iran and the US. Any return is expected to be limited and opportunistic, based on specific risk assessments.
A de-escalation of geopolitical issues could potentially normalize Suez Canal sailings in the second half of the year. However, to maintain current tonne-mile levels, liftings would need to increase by around 74% if LR East to West voyages revert from the Cape of Good Hope to the Suez Canal. Constrained refinery run rates and limited alternative outlets suggest a substantial increase in East to West volumes is unlikely, meaning a normalization of routing would likely reduce tonne-mile demand for the LR fleet.
Fleet Age Profile and Scrapping: Removal is Likely to Be Slow
LR2s are generally younger than LR1s, limiting natural attrition. Even with a high number of deliveries, scrapping is unlikely to keep pace with newbuilds as much of the fleet remains commercially viable. Older, non-sanctioned LR tonnage remains active, with employment becoming more segmented and increasingly domestic as vessels age.
Voyage counts have increased across both age brackets since 2023, with a clear bias toward dirty voyages overall. This indicates that older LRs do not quickly exit the market due to viable pathways, and their participation is often peripheral to mainstream international trading. Demolition decisions will likely remain dependent on earnings potential.
Refinery Dislocation and Tonne Miles
Net refinery additions in 2026 are concentrated in the Pacific Basin, potentially leading to increased Asian exports when domestic demand is soft. Closures in the Americas, such as Benicia in the US, could tighten local supply and necessitate longer haul repositioning moves. However, these changes are unlikely to significantly alter clean trade flows.
The evolving refinery landscape should create some tonne-mile support, favoring larger vessel classes, but the impact is expected to be uneven and insufficient to offset broader clean fleet supply growth.
Overall, the LR market is transitioning from a period of supply tightness to one of normalization. A heavy delivery schedule, reduced incentive for dirty trades, and a potential return to Suez transits are all contributing to this shift. While demand is not collapsing, the balance of risks is tilting towards softer freight rates as supply availability improves and routing efficiency increases.
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