Dirty freight market report: USGC crude freight is undervalued while WAF Suezmaxes look expensive vs the competition

Both TD25 and TD22 are now undervalued. The USGC crude freight market is working to price into global refinery zones.

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 now $1.95/mt undervalued. Afra tonnage supply in the 14-day ahead window is in line with the trailing 90-day average of 14 vessels. Tonnage supply is neutral and the Afra RBI is undervalued with spot repeating at 147 WS. Rates will be supported going into the long 4th of July holiday weekend in the US. Beginning of next week though the tonnage list will likely look long given the holiday so expect some mild negative sentiment to start next week.

· TD20 flipped to overvalued by 77c/mt basis the RBI over the last week. Even as Prompt TD20 rates weakened the RBI moved higher into overvalued territory. This is a bearish price action signal. Suezmax tonnage supply in the 14-day ahead window is neutral and in line with the 90-day trailing average of 11 vessels. TD20 & WAF crude grades are now pricing less competitively into NWE combined with a neutral tonnage count and spot rates should head lower towards 80 WS narrowing the spread to July.

· TD3c rates are now back to pre-12 day war levels. The aggressive reprice lower moved the RBI into undervalued territory, first time in the last two months. Currently undervalued by 58c/mt. AG VLCC tonnage remains long at 10 vessels over the 90-day trailing average of 37 open Vs in the 14-day ahead window. Tonnage is longer this week compared to last week. Even though TD3c is now undervalued vs the competition the tonnage overhang remains substantial and spot rates likely move lower & deeper into contango.

· TD22 RBI is now materially undervalued by -$2.40/mt. VLCC tonnage in the USGC in the 14-day ahead window remains tight this week at one vessel below the trailing 90-day average. The near-term bottom for TD22 spot rates is in and July should roll up towards spot.

(TD25 RBI under/overvalue analysis)

(TD20 RBI under/overvalue analysis)

(TD3c RBI under/overvalue analysis)

(TD22 RBI under/overvalue analysis)

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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