NWE MR Market Report

Vessel supply in the NWE MR market stands at six ships in the seven-day ahead window against a 90-day moving average of 16, placing prompt availability ten vessels below average. This sharp tightening reflects a decisively bullish supply signal for owners, reinforced by robust cargo enquiry despite negative arb margins on traditional transatlantic routes.

The spot TC2 rate has climbed to 246 WS against a forecasted rate of 240 WS. Traditional Rotterdam to New York arb margins remain closed through June. Yet unconventional discharge routes and stronger African product flows are driving enquiry beyond standard trade lanes.

Nigeria’s Dangote refinery has accelerated the flow of refined oil products across Africa, where markets have been forced to wrestle with the loss of Arabian Gulf barrels since the war began late last month, supporting regional demand for Atlantic Basin tonnage. Distillate market dynamics are reinforcing this cross-market demand picture, with Yanbu diesel loaders pointing firmly East, while the United States has emerged as the marginal flow into that trade rather than the Gulf.

Per Neil Crosby, Houston diesel on LR2s is generating substantially better margins to Singapore than to Rotterdam for May loaders, with the eastbound route only marginally negative, confirming that Atlantic product is finding genuine eastward pull across multiple grades and supporting demand for tonnage well beyond the gasoline and naphtha trades.

Over the past few days, the Aegean Star fully fixed at an undisclosed rate for 24-26 March dates loading Pembroke Dock to USAC, while the Torm Strength was placed on subjects at 4545K lumpsum loading Pembroke Dock to South Africa for early April dates. The Silver London fixed at 240 WS for 27 March loading Cartagena to the United States, reflecting current mid-200s rate levels and confirming owners are achieving strong returns despite closed traditional arbs.

The TC2 paper market has surged sharply, with April trading at 285 WS and May and June at 217.5 WS, and Q2 settling at 220 WS. The steep backwardation from April through Q2 reflects expectations that the current supply squeeze will ease into the second quarter, though geopolitical risk remains elevated.

Distillate cracks have shown notable resilience, with April diesel East/West spreads rising to +$70/mt from flat a week ago, and April Jet East/West shifting $120/mt in favour of Singapore over the same period, though the latter remains deeply negative. These moves are a reminder that even a hypothetical reopening of the Strait of Hormuz would leave global product supply normalisation months away.

The market remains bullish for the near term despite closed traditional arb margins, as tight tonnage availability and unconventional cargo flows are overwhelming tonnage supply. Neil highlighted today that the Port Arthur outage is a broader reminder that a global refining system running at elevated utilisation rates after months of deferred maintenance is increasingly exposed to unplanned disruption risk. Ampol’s recent announcement of a Lytton turnaround deferral illustrates this as well.

Owners can push above last done into the 270s WS. Charterers would be wise to cover April requirements immediately, as the combination of tight tonnage and continued Middle East supply disruption leaves little room for rates to soften before deeper into Q2.