When you're in the product tanker business and rates are pushing past $30,000 per day, you tend to have a spring in your step. That's the vibe from a recent Capital Link shipping sector webinar featuring CEOs and executives from d'Amico International Shipping (DMCOF), Hafnia Ltd. (HAFN), Scorpio Tankers Inc. (STNG), and TORM (TRMD). The panel, moderated by Gregory Lewis, Head of Maritime Research at BTIG, painted a picture of a market experiencing one of its strongest periods in history, propelled by forces that few saw coming at the start of the year.

The Crude Connection Nobody Expected

The biggest surprise, according to Carlos Balestra di Mottola, CEO of d'Amico (DMCOF), is what insiders call "oil on the water." Here's what happened: global oil production jumped by nearly 5 million barrels per day between the first and fourth quarters of 2025. OPEC unwound its production cuts while non-OPEC producers ramped up output. All that crude needed moving, and it tightened the crude tanker market dramatically.

The ripple effect hit product tankers hard, but in a good way. With crude tanker rates soaring, some product tanker owners made the call to "dirty up" their vessels, converting them to carry crude oil instead of refined products. Fewer product tankers available means higher rates for those still in the game. It's basic supply and demand, turbocharged by crude market momentum.

Structural Shifts Making Longer Voyages the Norm

Beyond the crude market boost, longer-term structural trends are stacking up in favor of product tanker economics. Soren Steenberg Jensen, EVP and Head of Asset Management at Hafnia (HAFN), highlighted the refinery geography shift. Northwestern Europe is shutting down refineries in places like the UK and Germany, while the Far East is bringing new capacity online. When your refinery moves from Rotterdam to Singapore, every cargo suddenly has thousands more miles to travel. More sailing distance equals more ton-mile demand, and that's music to shipowners' ears.

Then there's the sanctioned fleet situation. Robert Bugbee, President at Scorpio Tankers (STNG), and Kim Balle, CFO at TORM (TRMD), both emphasized that a massive chunk of the Aframax and LR2 fleet is now tied up in sanctioned trades, primarily related to Russian oil. Balle noted that over one-third of the combined Aframax/LR2 fleet is already sanctioned, and these vessels are aging badly while operating inefficiently outside conventional trade networks.

The consensus among the panelists is that sanctions won't lift quickly. Even if the war in Ukraine ends, Bugbee expects any unwinding to be gradual and measured. The longer these ships stay in the shadows, the older and less viable they become for returning to mainstream commerce. It's essentially a permanent supply removal happening in slow motion.

Balance Sheets Look Better Than They Have in Years

Strong markets mean strong cash flows, and product tanker companies are using that financial firepower to reward shareholders. Company balance sheets are healthier than they've been in years, translating into clear dividend policies and attractive return profiles.

Bugbee laid out a concrete example that makes the investment case crystal clear. Take an LR2 vessel fixed on a 5-year time charter. The asset is valued at roughly $50 to $53 million and earns about $22,000 per day in free cash flow. That works out to approximately $7.5 million annually in unlevered returns. Now consider that public company stocks are trading at discounts to the net asset value of these vessels. Shareholders effectively get an even higher yield than the already impressive asset-level returns.

Scorpio Tankers (STNG) is pursuing a conventional dividend policy that aims to increase payouts through the cycle. Other companies are following similar playbooks, using strong earnings to lock in shareholder value while market conditions remain favorable.

Charter Market Heating Up on Confidence

The period charter market tells you a lot about how confident owners and charterers are about the future. Balestra di Mottola mentioned significant interest from counterparties for 2 to 3-year charters, with d'Amico (DMCOF) securing coverage at profitable rates. That's not speculation, it's real money being committed for years into the future.

Bugbee pointed to a recent 5-year fixture to a major oil company as evidence that strong crude market conditions are not only lifting spot rates but also underpinning confidence in longer-term commitments. When an oil major is willing to lock in a vessel for five years, they're making a statement about their view of market fundamentals. And right now, that view looks pretty optimistic.

The combination of surging crude production, structural demand shifts from refinery relocations, and a sanctioned fleet that's permanently sidelined creates a setup where product tanker owners have pricing power and financial flexibility. For investors looking at the sector, the math is straightforward: strong cash flows, healthy balance sheets, and shareholder-friendly capital allocation policies in a market environment that shows little sign of weakening anytime soon.

Disclosure: Capital Link is the investor relations advisor to d'Amico International Shipping 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.