MR2 demand holds steady, LR2 at dataset lows
Comparing post-conflict (March 2026) CPP tonne-miles against an uneventful 2019 baseline, the demand picture looks healthy for MR2s. Larger vessels have not fared as well, posting consecutive losses and a dataset low (-35% from 2025 average level) every month from April to August. This is mostly unsurprising, since the Middle East has been the largest demand centre for LRs, by far, contributing to almost 50% of the global tonne-miles for diesel and naphtha flows during the pre-conflict era.
Despite this sustained loss in demand, LR2 freight rates have not followed the same pattern. Apart for the apparent risk element that supported rates around the Middle East, tonne-miles and vessel availability for LR2s declined in tandem, as tankers switched to the dirty trade, which cushioned freight rates and underlined how crude flows have been prioritised over clean products to keep refineries located away from oil producing countries supplied. Since March 2026, there has been a reduction of 52 LR2 trading clean products.
MR2 resilience drivers are varying throughout the conflict
MR2 demand looks stable during the conflict, but the drivers have shifted throughout. In the first half of the conflict, the Atlantic Basin was the primary employment hub for CPP exports, reaching a record high in late April with significant volumes heading to the Pacific, before volumes stayed within the Basin as summer demand picked up.
After June, and the first more concrete signs of a possible ceasefire, employment strength moved geographically. Asian countries secured more crude and began rebuilding inventories, with refining runs ramped up through July and August, supporting Pacific Basin employment. North and Southeast Asian employment reached its highest level in almost three years. Additionally, taking into account the loss of Atlantic Russian diesel following the ban, the employment picture between the two basins looks starkly different from the start of Q2. Vessel movements have also become more regionalised for MR2s, with short-haul trades replacing the long-haul interbasin movements seen in spring.
Outlook: Product supply tightening to cap employment
The recent drivers are important in order to understand where the markets go from here. With geopolitical instability continuing to threaten oil supplies from the Red Sea, the Middle East and Russia, doubts are growing over whether product supply can keep pace. Since March, liftings for refined products in North America and Asia are up by around 2 mbd versus 10-year average, while the rest of the world has lost 3.4 mbd — Europe, the Middle East and Russia are the main culprits. The net effect is a loss of more than 1 mb/d and with refiners in the US running at full til (PADD 3 refinery utilisation rates close to 100%), additional employment opportunities see limited upside.
Triangulation offers relief for LR2s but only short-term
For LR2 operators, triangulation is opening up opportunities. LR demand centres have shifted from the Atlantic and MEG toward traditional discharge locations such as Northeast Asia. LR2 Northeast and Southeast Asia voyages have risen to their highest level since a year ago. A vessel discharging a light distillate in Northeast Asia — having sailed from the Med or the Gulf of Oman — can pick up a middle distillate for the return leg to Asia Pacific or Europe, minimising ballast time.
This support nevertheless, may be short-lived. Heading into Q4, demand moves away from Europe, while South Korea may hold back jet/kero supplies to meet domestic heating needs. At the same time, the rebound in Asian refining runs that has supported MR demand recently may not hold for long. Beyond a tightening products market, crude supply is also facing a sharp shortfall. Crude and condensate on the water peaked above 1.32 billion barrels on 13 July, as higher Hormuz transits following the US-Iran truce and sanction waivers combined with record exports elsewhere and long voyage times to Asia. Over the following four weeks however, crude and condensate on the water drew down by 175 million barrels — a rate of 6.2 mb/d — as exports from Iran, Russia, Saudi Arabia and the United States fell by a combined 5 mb/d within a month (read more here).
VLCC arrivals in the Atlantic are rebounding once more, pointing to a pickup in crude flows, but levels remain 35 % below the peak seen at the onset of the conflict. Given a lag of at least 2 months before Atlantic barrels could reach Asian markets, refiners could be forced to cut runs once more; a move that would suppress CPP exports and clean tanker demand across Asia Pacific.
