CPP AG/WCI market report: Pressure on rates builds

AG LR1: Spot TC5 rates have weakened faster than expected as negative arb margins begin impacting tonnage counts ahead of October pricing. The weakness in freight is justified: neutral spot arb economics and sharply negative October-loading margins signal a bearish start to Q4.

Jet arb margins into Rotterdam for October LR1 loadings have fallen by $6/mt and now sit at breakeven. Diesel economics on the same route have deteriorated significantly over the past 10 days as well. At present, all October-loading LR1 arbs are shut, with the exception of marginally open gasoline and naphtha flows into Indonesia. This lack of demand is contributing to growing tonnage lists.

LR1 availability (15, 7d, 10avg) has increased materially versus last week and is well above counts from two weeks ago. As we head into October, the outlook for AG and WCI LR1 spot and paper markets is increasingly bearish – margins are unworkable, and excess tonnage has already accumulated.

Michael Ryan, our Freight Commodity Owner at Sparta, brings over a decade of experience with Trafigura in the energy sector managing risk across products and regions before becoming Head of Risk for subsidiary Puma Energy. Michael then joined the Trafigura commercial team trading freight while successfully growing the physical fleet through strategic dealmaking.

Sparta is a live, market intelligence and forecasting platform that enables oil traders, refiners, banks, hedge funds and wholesalers to have access to real-time and global actionable insights to capture market opportunities before others.

To find out how Sparta can allow you to make smarter trading decisions, faster, contact us for a demonstration at sales@spartacommodites.com