Clean freight market report: LATAM arbs support USGC; NWE & AG margins weaken

Commentary summary:

USGC MR: Spot market is ~10 WS points overvalued, but 160 WS could hold near-term on open August loading LATAM arbs (diesel to Argentina/Brazil, gasoline to Guatemala/Ecuador). The TA diesel arb is shut by $9/mt; TC14 must fall below 125 WS to reopen, which is the near-term lower band pain threshold. 7-day tonnage rose to 15 (avg 14). Even with neutral supply and poor TA arb margins LATAM arbs should support current freight levels.

NWE MR: Bullish short-term on tight 7-day tonnage supply and July gasoline arb activity, but August looks weak as arb margins have collapsed. Mid-Aug margins are mostly shut (except gasoline to BA/Offshore Lome). The NYC gasoline arb is shut by over 5cpg and refinery econ margins are also closed. With spot TC2 in the 140s WS, August rates at 116 WS look too high. Expect the spot/Aug spread to narrow followed by Aug outright weakening.

Philip Jones-Lux is Senior Analyst for Sparta. Having worked with organisations such as JBC Energy and RP Global, Philip is a seasoned energy market analyst with expertise across the oil barrel and power markets

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