Asian freight rates for Long Range I clean tankers on the benchmark Persian Gulf to Japan route fell below the key 100 Worldscale points Wednesday for the first time in eight weeks due to tonnage oversupply and thin demand, shipping sources said Thursday.

The LR1 PG-Japan rate slid w5 day on day to w97 Wednesday.

A fixture was widely reported Wednesday at w95 by Vitol for the Orfeas loading April 23 for a West Coast India to Japan route. The fixture was confirmed by a source close to the matter.

The WCI-Japan 55,000-mt route trades at the same level as the PG-Japan 55,000-mt route on the Worldscale basis.

PG-Japan freight rates hit w100 for the first time this year on February 12, then peaked at w110.25 on March 13.

The fall in LR1 freight rates has narrowed the spread against rates for the larger Long Range II tankers on the PG-Japan route. Some sources said the two freight rates might be on par with each other for the first time since 2012.

"The Orfeas had a last cargo of gasoline and is coming open from Karachi, which is near the load port," a charterer said. "This has affected the rate to get as low as w95. There is nothing else new in the market except two naphtha tender cargoes out of Aden and Kuwait."

The weakness in the LR1 market has forced owners of the vessels to compete with MRs for short-haul cargoes in the Persian Gulf region, sources said.

A shipowner source said LR1 vessels such as the Yamilah III, Marinor and BW Columbia were heard loading MR sized cargoes for cross-Persian Gulf voyages at rates of $260,000-275,000, the same level as MR freight for such voyages.

"For the LR1s, obviously because of the spread of tonnage available, there is not much optimism," an LR1 shipowner source said. "I don't think the tonnage will clear up soon so there is room for the rate to slide further."

Sources said charterers have become keen on lifting naphtha cargoes on LR1 tankers as the vessels getting cheaper in relation to the LR2 segment. However, not all charterers would be able to make the quick change from 75,000-mt LR2-sized cargoes to 55,000-mt LR1-sized cargoes to take advantage of the narrower spread, sources said.