How to Charter an Oil Tanker: Tanker Types, Sizes and Petroleum Cargoes

How Oil Tanker Chartering Works

Once a petroleum trader buys or sells a seaborne cargo, somebody has to provide the ship.

That creates the tanker chartering requirement.

A diesel parcel moving from the Middle East Gulf to East Africa may require an MR or LR1 product tanker. A 2 million barrel crude movement from the Gulf to Asia may require a VLCC. A regional crude cargo could move on an Aframax.

Choosing the vessel involves far more than finding enough cargo capacity. The tanker has to fit the terminals, draft restrictions, cargo specification, loading window, discharge window, tank requirements and commercial terms of the trade.

Crude Tankers vs Product Tankers

The first distinction comes from the cargo.

Crude tankers primarily move unrefined crude oil between production regions, export terminals and refineries.

Product tankers primarily move refined petroleum products such as diesel, gasoline, jet fuel, gasoil, kerosene and naphtha.

The market usually refers to larger crude ships as Aframax, Suezmax and VLCC. Product tanker desks more commonly work with Handy, MR, LR1 and LR2 vessels.

The size bands can overlap. An LR2 and an Aframax can occupy a similar deadweight range while serving different trades.

Tank coating, pumping arrangements, previous cargoes, segregation capability and vessel certification help determine which products a particular tanker can actually lift.

What DWT Means

Tanker size is commonly discussed using deadweight tonnage, or DWT.

DWT measures the total weight the vessel can carry, including cargo, bunkers, water, stores and other consumables.

A 50,000 DWT tanker therefore cannot automatically load 50,000 metric tons of cargo under every voyage condition. Draft limits, bunker quantities, water density and port restrictions affect the final lift.

For product tankers, cubic capacity also matters because lighter petroleum products can fill the available tank volume before the vessel reaches its maximum deadweight.

Handysize Product Tankers

Approximately 25,000–40,000 DWT

Handysize tankers handle smaller petroleum parcels and serve ports where draft, berth length or storage capacity limits larger vessels.

Typical cargoes can include:

• Diesel
• Gasoil
• Gasoline
• Jet fuel and kerosene
• Naphtha
• Fuel oil on suitable vessels
• Vegetable oils
• Certain easy chemicals on suitably equipped ships

Their smaller size gives traders flexibility for short-sea movements, island markets, coastal distribution and smaller terminals.

MR — Medium Range Product Tankers

Approximately 40,000–55,000 DWT

MR tankers form one of the core segments of the global clean-products market.

They combine meaningful cargo capacity with access to a wide range of ports. That flexibility makes them useful for regional and interregional product movements.

Typical MR cargoes include:

• EN590 and other diesel grades
• Gasoline
• Jet A-1
• Gasoil
• Kerosene
• Naphtha
• Blendstocks
• Selected chemicals and vegetable oils where the vessel's certification and tank system permit them

An MR can also carry several segregated parcels when its tank and piping arrangement allows it. That makes the class useful for traders serving multiple buyers or carrying different compatible grades on the same voyage.

LR1 — Long Range 1 Product Tankers

Approximately 55,000–85,000 DWT

LR1 vessels sit between the highly flexible MR market and the larger LR2 segment.

They suit larger product parcels where an MR would require several voyages and an LR2 may carry too much capacity for the trade.

Common cargoes include:

• Diesel
• Gasoil
• Jet fuel
• Gasoline
• Naphtha
• Fuel oil on suitable vessels and trades

LR1s appear on medium- and long-haul product routes where parcel size and port capability support the larger ship.

LR2 — Long Range 2 Product Tankers

Roughly 85,000–125,000 DWT in common product-tanker segmentation

LR2s move large volumes of refined products over long distances.

They feature prominently in long-haul movements of:

• Diesel
• Gasoil
• Jet fuel
• Naphtha
• Gasoline and gasoline components

An LR2 can share a similar hull-size range with an Aframax. The commercial distinction often comes from the trade and cargo system. LR2 terminology generally points toward coated product-tanker service, while Aframax terminology generally points toward crude and dirty petroleum service.

Aframax Tankers

Approximately 80,000–120,000 DWT

Aframax tankers form a major part of the regional crude-oil market.

Typical cargoes include:

• Crude oil
• Fuel oil
• Other dirty petroleum products where the vessel is suitable

Their size gives them access to more terminals than a VLCC while still providing meaningful economies of scale.

Aframaxes are commonly used for regional and medium-haul crude movements where production volumes, port draft or buyer requirements favour smaller parcels.

Suezmax Tankers

Approximately 120,000–200,000 DWT

Suezmax tankers carry large crude-oil parcels on major international routes.

A typical crude lift can approach roughly 1 million barrels, with actual cargo determined by oil density, vessel particulars and draft restrictions.

Suezmax vessels commonly carry:

• Crude oil
• Occasional large dirty-product cargoes on suitable vessels

The class appears frequently in crude trading from producing regions such as West Africa and other major export markets into refining centres.

VLCC — Very Large Crude Carriers

Approximately 200,000–320,000 DWT

VLCCs sit at the centre of long-haul crude transportation.

A modern VLCC commonly moves around 2 million barrels of crude, subject to cargo density, draft and terminal restrictions.

Their primary cargo is:

• Crude oil

The economics come from moving enormous volumes over long distances at a relatively low freight cost per barrel.

Terminal access becomes much more restrictive at this size. Many ports lack sufficient depth or berth infrastructure for a fully laden VLCC, creating demand for offshore terminals, single-point moorings and ship-to-ship transfer arrangements.

ULCC — Ultra Large Crude Carriers

Above approximately 320,000 DWT

ULCCs occupy the extreme end of the crude tanker market.

They can carry several million barrels of crude, but their dimensions sharply restrict the terminals and waterways they can use.

VLCCs therefore provide more operational flexibility across most large-volume crude routes.

Specialized Tankers

Some petroleum cargoes require more specialized ships.

Chemical and Parcel Tankers

Chemical tankers use coated or stainless-steel tanks and can carry numerous segregated liquid cargoes.

Depending on certification and tank construction, cargoes can include petrochemical feedstocks, solvents, methanol and other liquid chemicals alongside selected petroleum-related products.

Bitumen and Asphalt Tankers

Bitumen requires purpose-built or suitably equipped heated tanks because the cargo must remain at a controlled temperature for pumping and discharge.

Bunker Tankers

Smaller bunker vessels deliver marine fuel directly to ships in ports, anchorages and bunkering hubs.

Cargoes can include very-low-sulfur fuel oil, marine gasoil and other marine fuels.

Shuttle Tankers

Shuttle tankers move crude from offshore production facilities to terminals or refineries.

They are particularly useful where offshore fields load directly from FPSOs or other offshore installations.

What About LPG and LNG?

LPG and LNG travel on dedicated gas carriers rather than conventional crude or product tankers.

LPG carriers transport products such as propane and butane using specialized pressure or refrigerated containment systems.

LNG carriers use heavily insulated cryogenic containment systems to transport liquefied natural gas at extremely low temperatures.

Their chartering markets, capacity measurements and vessel designs differ materially from conventional oil tankers.

Clean vs Dirty Tankers

Chartering desks often divide petroleum cargoes into clean and dirty trades.

Clean Petroleum Products

Clean products generally include lighter refined products where contamination control carries a high commercial value.

• Gasoline
• Diesel
• Jet fuel
• Kerosene
• Gasoil
• Naphtha

Product tankers carrying clean cargoes typically use coated cargo tanks and carefully managed cargo systems.

Dirty Petroleum Cargoes

Dirty cargoes generally include crude oil and heavier residual products.

• Crude oil
• Fuel oil
• Heavy residual products
• Certain refinery intermediate streams

Cargo history matters. Moving from a dirty trade back into sensitive clean-product service can require extensive tank cleaning and may still face charterer restrictions.

Quick Tanker Guide by Product

Voyage Charter

A voyage charter covers one defined voyage.

The charterer hires the vessel to move an agreed quantity of cargo from the nominated loading area to the nominated discharge area.

The owner operates the vessel and earns freight for performing the voyage.

For physical traders moving individual cargoes, the voyage charter is often the most relevant structure.

Commercial negotiations typically cover:

• Cargo quantity
• Load port or range
• Discharge port or range
• Laycan
• Freight
• Laytime
• Demurrage
• Cargo options
• Vessel requirements
• Charterparty terms

Time Charter

A time charter gives the charterer commercial use of the vessel for an agreed period rather than one specific voyage.

The charterer can direct the ship between eligible trades within the contract while paying daily hire.

This structure can suit traders with recurring cargo programmes and enough volume to keep the vessel employed.

Time-chartering also transfers more voyage-cost exposure to the charterer, including the commercial impact of routing, bunkers and vessel utilization under the agreed contract.

Contract of Affreightment

A contract of affreightment, or COA, covers a series of cargo movements over an agreed period.

For example, a petroleum trader could agree transportation for one 40,000 metric ton diesel cargo every month for twelve months.

The shipping counterparty provides suitable tonnage for each lifting according to the COA.

COAs fit recurring trade corridors because the trader secures transportation capacity around a forward cargo programme without relying on a single vessel for the entire period.

How Worldscale Works

A large part of tanker voyage chartering uses Worldscale.

Worldscale publishes a nominal dollar-per-ton freight rate for specific tanker voyages based on a standard vessel and standardized assumptions.

That published route rate represents WS100.

A fixture at WS80 means 80% of the applicable Worldscale flat rate. WS125 means 125%.

Worldscale gives tanker desks a common language for comparing freight across routes.

What Laycan Means

Laycan combines the vessel's laydays and cancelling date.

In practical terms, it defines the agreed arrival window for the tanker at the loading location.

The ship needs to meet that window and satisfy the charterparty requirements for readiness.

A mismatch between cargo availability and vessel arrival can become expensive very quickly.

Laytime and Demurrage

Laytime represents the contractual time allowed for loading and discharging.

Once the permitted time has been consumed, demurrage can become payable under the charterparty.

Demurrage can erase a petroleum trader's margin surprisingly quickly.

A cargo earning USD 200,000 of expected trading contribution can become far less attractive after several days of avoidable vessel delay.

Terminal congestion, slow pumping, missing documents, unavailable storage and customs delays all deserve attention before the ship arrives.

Deadfreight

A charterer can also face deadfreight when the contracted cargo quantity falls below the agreed minimum and the vessel sails with unused earning capacity.

Suppose a vessel is fixed for a minimum 40,000 metric tons and the trader ultimately presents only 35,000 metric tons.

The freight consequences for the missing quantity will depend on the charterparty.

Confirm the cargo position before committing to tonnage.

Tank Coating and Cargo Compatibility Matter

Vessel size alone cannot determine suitability.

The charterer should review the ship's cargo system and its compatibility with the nominated grade.

Relevant factors include:

• Cargo tank coating
• Previous cargoes
• Tank cleanliness
• Segregation capability
• Cargo pumps
• Heating coils
• Maximum loading and discharge rates
• Vapor-return requirements
• Cargo certification

Jet fuel provides a good example. A vessel can have enough physical capacity while its previous cargo history or tank condition makes it unattractive for aviation fuel.

Port Restrictions Can Decide the Vessel Class

A cheaper freight rate from a larger vessel only helps when the load and discharge infrastructure can accept the ship.

Check:

• Maximum draft
• Length overall
• Beam restrictions
• Berth dimensions
• Manifold compatibility
• Terminal pumping capacity
• Air-draft restrictions
• Tug requirements
• Tidal limitations
• Terminal vetting requirements

A trader may obtain cheaper freight per ton on an LR2 than an MR while losing the advantage because the destination terminal cannot berth the larger ship.

Vessel Vetting Comes Before Fixture

Serious charterers review the nominated tanker before final acceptance.

The review can cover vessel age, ownership, technical management, classification, insurance, inspection history, sanctions exposure, flag, casualty history, cargo history and terminal acceptance.

Oil majors, refiners, terminals and large commodity houses can maintain their own acceptance criteria.

A commercially attractive ship has limited value when the loading terminal or buyer refuses the nomination.

How a Tanker Fixture Comes Together

A typical fixture starts with the cargo requirement.

1. Define the Cargo

Confirm product, quantity, load port, discharge port, laycan and any special vessel requirements.

2. Find Suitable Tonnage

The chartering desk or broker identifies vessels that can meet the cargo dates and terminal requirements.

3. Compare the Ships

Freight forms only part of the comparison. Position, speed, cargo capacity, consumption, tank suitability, vetting status and port compatibility all matter.

4. Negotiate Main Terms

The parties negotiate freight, cargo quantity, laycan, load and discharge ranges, demurrage and other commercial terms.

5. Fix on Subjects

A vessel can be placed on subjects while the charterer completes outstanding approvals such as management approval, stem confirmation, terminal acceptance or vetting.

6. Lift Subjects

Once the required approvals are complete and subjects are lifted, the fixture becomes firm according to the agreed terms.

7. Execute the Voyage

Operations teams coordinate vessel arrival, nomination, documents, terminal instructions, loading, sailing and discharge.

FOB vs CIF: Who Charters the Tanker?

The petroleum sale structure often determines which side arranges the main ocean transportation.

Under a typical FOB sale, the buyer arranges the tanker for the main voyage and nominates the vessel to the seller.

Under CFR or CIF terms, the seller arranges the main carriage to the destination port, with CIF also requiring the seller to arrange the contractually required cargo insurance.

The sale contract and charterparty therefore need to work together.

Loading windows, quantity tolerances, pumping rates and demurrage provisions can create financial exposure when the two contracts use incompatible terms.

Charter the Vessel Around the Trade

The largest tanker rarely produces the best answer automatically.

A trader should compare the complete logistics economics.

A larger vessel can reduce base freight per ton while creating extra lightering, storage or port costs.

The right ship minimizes the total cost of performing the petroleum trade.

Chartering and Trade Finance Need to Match

The tanker forms part of the wider transaction structure.

A financier reviewing a physical petroleum trade will often want clarity around the cargo, supplier, buyer, vessel, shipping documents, insurance, title transfer and repayment flow.

Freight also feeds directly into working-capital requirements.

A trader paying for product at load port, freight during transit and terminal costs before collecting from the buyer may need significant capital for the voyage.

Financely structures petroleum products trade finance around eligible purchase contracts, cargo, logistics, offtake and repayment flows.

Bottom Line

Tanker chartering connects the commercial petroleum contract with the physical movement of the cargo.

MR, LR1 and LR2 vessels dominate much of the refined-products trade. Aframax, Suezmax and VLCC vessels handle increasingly large crude parcels.

Cargo suitability goes beyond DWT. Tank coating, previous cargoes, segregation, draft, terminal restrictions and vetting can all decide whether a particular ship works.

Before fixing a tanker, confirm:

• Exact product and specification
• Cargo quantity
• Load and discharge ports
• Laycan
• Terminal restrictions
• Tank and cargo compatibility
• Freight basis
• Laytime and demurrage
• Vessel vetting
• Impact on the total trading margin

A good charter moves the required cargo at the right time while protecting the economics of the underlying petroleum trade.