Dirty freight market report: Global VLCC rates are under continued pressure

TD25 and TD20 are materially undervalued. TD3c and TD22 spot weakness should drag their forward curves lower.

The Sparta RBI (relative basket index) compares the route in question against all material relevant global competing routes delivering crude grades into the same destination. It provides an under/overvalued signal and is an inverse leading indicator for freight demand and FFA price action.

TD25: RBI is $6.57/mt undervalued. Afra supply in the 14-day window is 18 vessels, 2 above the 90-day average but down from 22 last week. Spot TD25 at 120 WS still looks cheap vs August at 137 WS (pricing starts Friday). Expect the spot/August spread to narrow, mainly via higher spot levels. WTI is arbing cheaply into NWE, and with undervalued Afras vs competition and neutral supply, spot rates should rise.

TD20: RBI is $3.48/mt undervalued — the lowest in 18 months. Spot fell 8 WS points last week, pushing the curve into contango. Suezmax supply (14-day window) is just below the 12-vessel 90-day average. The 8-point move vs a 3-point implied RBI drop makes TD20 materially undervalued. With WAF Suezmaxes pricing competitively into NWE, neutral supply, and a mild contango, spot should reprice toward August levels (~80 WS).

TD3c: RBI remains neutral. The curve steepened into contango through December, with the spot/August spread at –8 WS. As spot weakened, global competition delivering crude to China also softened, leaving RBI steady. VLCC supply is 48 (5 above the 90-day avg), with prompt tonnage long. Outlook is bearish; the curve may roll lower.

TD22: RBI is mildly undervalued after rates fell $2/mt in under a week. Global VLCC rates remain under heavy pressure. Despite the drop, RBI only marginally dipped into undervalued territory. USGC VLCC supply is 2 above the 90-day average. Continued weakness in USGC/global VLCC rates should drag forward pricing lower.

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.

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