Investing.com -- Spot rates for crude and product tankers reached record levels as the Strait of Hormuz remains largely closed, according to B. Riley. Progress toward reopening the strait has been uneven.

Tanker operators are choosing to operate mainly in the spot market rather than accepting time charter offers at longer durations, despite attractive rates being offered for those contracts. The spot market's short-term nature has introduced higher risk levels to the sector during this period of elevated rates.

B. Riley said longer-term indicators point to continued strength for the remainder of fiscal year 2026 and the first half of 2027. The firm does not expect rates to stay at record levels over the long term but anticipates relative strength even as rates decline from peak levels.

Charterers are securing vessels at higher daily rates for longer periods through time charter fixtures, reflecting growing ton-mile demand in the current market. This trend persists despite the possibility of future normalization of tanker traffic in the Persian Gulf. Some charterers are also locking in longer-term charters for newbuild vessels scheduled for delivery two or three years from now.

High asset values reflect expectations of higher rate levels. Stock performance for both crude and product tankers year-to-date mirrors these elevated rates and tanker asset values.

B. Riley maintains its recommendation to purchase crude and product tanker shares, stating its view that the current upcycle will extend beyond fiscal year 2026. The firm expects continued rate volatility tied to shifting geopolitical and economic outlooks but anticipates rates will remain well above comparable historical levels.