The Platts clean tanker index closed at its highest level to date on Sept. 30, reaching $121,198/day for non-scrubber-fitted, non-eco vessels, as a converging diesel supply shock — and the threat of US export restrictions — pushed middle-distillate flows through both basins.

MR2s feel the squeeze most directly. The vessel class carries more than 90% of US diesel exports, according to BRS Shipbrokers, which warned Sept. 28 that restrictions could strand around 1.35 million b/d of US Gulf diesel — the equivalent of four MR2 cargoes per day.

What would a US diesel export ban actually do?

President Donald Trump floated an outright ban in response to record domestic fuel prices ahead of midterm elections. Energy Secretary Chris Wright said Sept. 23, however, that the administration was weighing "a range of options" to keep more US-produced diesel at home without imposing a full prohibition.

BRS nonetheless modeled the worst case. Europe and Latin America would sit "in the eye of any US ban" given limited alternative supply. MR2s would also lose the lucrative triangulation trade that delivers gasoline into the US Atlantic Coast before lifting US Gulf diesel for the return leg to Europe, BRS said.

Why are diesel prices so high right now?

Three disruptions hit the middle-distillate market at once. Russian seaborne diesel exports plunged to 143,000 b/d in Q3, down from 686,300 b/d a year earlier, according to S&P Global Commodities at Sea data. Persian Gulf flows fell to 540,900 b/d in Q3 from 1.2 million b/d previously. US exports have partly filled the gap, rising to 1.5 million b/d in Q3 from 1.3 million b/d.

Platts assessed ULSD cargoes on a CIF basis in Northwest Europe at $78.86/barrel Sept. 30, up 151% from Feb. 27 — before the Middle East war started — and 274% above the five-year average.

Are tankers leaving the clean trades?

Yes. Shipbroker Gibson said at least 100 coated LR2 units have moved into dirty service, thinning clean tonnage lists on long-haul east-to-west runs. East-to-west LR demand has absorbed Middle Eastern and West Coast Indian barrels.

"High cargo volumes are meeting tighter tonnage as active dirty-up activity continues — with at least 100 units of coated LR2 now engaged in dirty service, leaving overall LR tonnage fairly limited," Gibson analysts wrote Sept. 25.

"Regional LRs, which typically position in Asia Pacific after discharging naphtha cargoes, are increasingly being fixed onto long-haul westbound runs into East Africa and Europe — a favorable outcome for owners, since it removes the long ballast leg otherwise needed to bring vessels back East," Gibson added.

How resilient is the MR segment?

S&P Global Energy Horizons analyst Fotios Katsoulas rates MRs as "the most fundamentally resilient clean tanker segment."

"Their cargo flexibility and broad exposure to diesel, gasoline, jet fuel, biofuels and other clean products continue to provide diversification benefits that are less available to larger vessel classes," Katsoulas said Oct. 1.

BRS identified only two plausible substitutes for stranded US Gulf barrels: Saudi Arabian Red Sea refineries, which could add roughly 250,000 b/d once the East-West crude pipeline is repaired, and Chinese refiners. China exported 425,100 b/d of diesel in September — the highest since December 2022, per S&P Global Commodities at Sea.

What does this mean for rates through year-end?

S&P Global Energy's James Simpson warned Sept. 30 that the export question is changing shipper behavior even before any policy lands.

"Markets can manage disruptions, but they struggle to manage a whole series of concomitant disruptions," Simpson said during a webinar.

"With the potential diesel ban coming, the appetite for US diesel exports is declining because these products are needed at home, whether there's a ban or not."

Preliminary data already shows shippers fast-loading cargoes ahead of any ban — a dynamic that could reverse and inject fresh volatility if export contracts are later canceled, BRS cautioned. With three supply regions contracting simultaneously and Atlantic Basin diesel trade pivoting ahead of any US action, clean tanker earnings look set to stay elevated into Q4.