Tanker rates have been on a tear through 2026, lifting crude and product tankers alike. Product tanker equities are up 93% this year, versus 150% for crude tanker equities, after both pulled back in mid-October. Product tanker owners report third-quarter results in November, with earnings expected to fall from Q2. The real test is what owners have fixed into Q4, and potential revisions to full-year guidance.
Q3 earnings are expected to be lower
Based on bookings disclosed so far, Q3 earnings across the main listed product tanker owners are about a third below their Q2 realised earnings. MRs are expected to fall furthest: average bookings of around $32,000/day are about 40% below the Q2 average of $53,000/day. LR1s show a similar decline. LR2s have held up better, with bookings around $57,000/day, about 10% below Q2, as crude demand absorbs part of the LR2 fleet. Analyst consensus estimates also point to a weaker quarter.
Rates moved after the books closed
Much of Q3 was booked by the end of August, before clean rates moved higher. Since then, clean tanker rates have risen close to 25% from mid-September to early October, are up more than 80% since June, and held firm into mid-October. Swing trades into dirty markets have helped lift rates, with stronger crude earnings drawing LR2s away from clean trading. About two-thirds of LR2s now carry dirty cargoes, leaving clean LR2 capacity about 5% below January levels. Crude rates eased in mid-October, and a sustained correction would weaken the pull that has kept LR2s in dirty trades.
That rise in benchmark rates does not automatically translate into stronger Q4 earnings. The key question is how much owners had already fixed, and at what levels, as rates moved up. Owners with more open spot exposure may capture more of the increase than those that fixed period charters earlier in the year. There is also a tendency for benchmark rates to pull ahead of what owners finally manage to realise.
Product tanker equities trail crude after a pullback from mid-October highs
Equal-weighted baskets, dividend-adjusted, indexed to 100 at 31 Dec 2025
| 2026 statistics | Product | Crude |
|---|---|---|
| Return, year to date | +93.0% | +150.0% |
| Max drawdown | −23.4%30 Jun | −17.8%13 Mar |
| Sharpe ratio | 2.4 | 3.0 |
Source: Tidewake.io
Note: Prices to 16 Oct 2026. Product tankers: Hafnia, TORM, Scorpio Tankers, Ardmore, d’Amico. Crude tankers: Frontline, DHT, International Seaways, Okeanis, Teekay Tankers. Sharpe ratio uses annualised daily returns less the average 13-week US T-bill yield (3.7%), divided by annualised volatility.
Equities are priced for strength
The equal-weighted baskets of listed product and crude tanker equities both peaked on 13 October, before falling 7% and 11% respectively over the following three trading days. Over the year, product tankers have delivered less return per unit of risk, with a Sharpe ratio of 2.4 versus 3.0 for crude, and experienced the deeper drawdown, falling 23% into the end of June.
At current valuations, there is little room for disappointment. Stronger Q4 cover or upgraded guidance could support further gains, but valuations remain exposed to geopolitical developments and the rate trajectory. The crude tanker forward curve points to rates about 80% lower by Q3 2027, a decline that could also weigh on product tanker rates. A tactical opportunity may remain if rates and sentiment strengthen, but the risk appears asymmetrically skewed to the downside.
The sequence of events
The month ahead brings several catalysts for tanker earnings and sentiment. OPEC+ meets on 1 November, and product tanker owners report from early November onwards (TORM on 4 November, the day after the US midterms, and Hafnia on 18 November).
Hormuz and the Red Sea remain the main swing factors. A higher-for-longer scenario in oil markets seems the more likely path, with refinery disruption and pressure supporting tight diesel markets. But the outlook is difficult to predict: sharp swings in freight rates and sentiment are likely to create tactical opportunities into year-end.
