More MEG region data

Investment Analysis Clubs Macro Economic Trends and Risks
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I commented on MEG (Middle East Gulf) region data from CMB.tech (CMBT) midweek. My favorite tanker company, Frontline plc (FRO) released their Q1 2026 results yesterday. FRO added more details to the situation. They offer rich data in chart form (Slides 9 and 10). Slide 10 - Wow! They took time to separate Saudi Arabia and UAE outputs both pre- and post- Strait of Hormuz closure. In the case of Yanbu, the Saudis diverted some of their output from the Gulf region over to Yanbu. One can see that captured in the slide.

https://ml-eu.globenewswire.com/Resource/Download/767cde4f-8aeb-491a-ad31-2bd20f020f5a

Like CMBT, Fontline also sold VLCC vessels to Sinokor. Adding a layer of irony - FRO sold 8 of 24 VLCCs they acquired from Euronav (the tanker portion of CMBT) in 2023-2024. So both companies have “contributed” to help consolidate the tanker market. Another three interesting items.

  • FRO mention adding more time-charter coverage on two newbuild VLCCs delivered recently @ $110,000 daily for a year.
  • In 2026, FRO had added already added charter coverage on 8 VLCCs prior to the MEG region lockdown. Those charters were each done at rates $77,000 - $93.000 daily.
  • Even the lowest one @ $77,000, is a very profitable rate. But, I am still slightly amused that a tanker company like FRO, that has traditionally focused on the spot tanker market, has opted for so much charter coverage.

On the last item, FRO understand the current market is a really strong tanker market. And yet, they seem to be employing a hedging strategy with the 1-year charters. Do they see something? I haven’t read their Earnings Call transcript yet.

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The wtic and brent last i saw were deep in backwardation. Months out things will get back to normal.

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I did get a chance to read the FRO earnings call transcript. There were a few useful items in the read.

  • FRO mgmt confirmed the reason for the charter coverage, and it was indeed a hedge. FRO mgmt have no idea how long the Strait of Hormuz is going to be shut. The share an anecdote of how tweets go out on Fridays that the Straits will reopen over the weekend. Then come Monday, no reopening.
  • There is an interesting development at play - about 55 VLCCs owned/chartered by National Oil Companies (NOCs) and/or major refineries are sitting idle outside the Gulf. Those vessels are not following a profit motivation. Theirs is a logistical, keep the production cycle going.
  • US Gulf has developed its own monthly pattern. VLCC rates strong for about 1 - 1.5 weeks, then it shifts to Suezmax, then down to Aframaxes. Is that a ton-miles impact?
  • FRO mgmt provided the data on charter lengths and daily rates 1-year charter $110K - $120K, 2-year charter $90K, 3-year $75K - $76K, 5-year in the $40Ks.

https://seekingalpha.com/article/4908009-frontline-plc-fro-q1-2026-earnings-call-transcript

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