TC2 Q4 paper is pricing a transatlantic gasoline arb that is wide open

TC2 paper had another firm session on Friday. October traded at WS 220 and firmed to WS 245, November at WS 240, November-December at WS 240 firming to WS 245 and Q4 at WS 245. Spot sits at WS 172 with the Freight Supply and Demand (FSD) model forecasting WS 170 into the 3 to 12 October load window, so the market is paying a WS 73 premium for Q4 against a spot rate the model expects to drift lower. That spread is not supported by anything in the underlying arb economics.

The NWE MR fundamentals are soft. Vessel supply is at 16 ships in the seven-day ahead window against a 90-day average of 19, a modest deficit, but incremental demand is negative. There is no supply-side squeeze here or demand-side pull to justify a Q4 paper buy at WS 245.

Last week’s uptick in gasoline fixtures moved spot rates higher, but it was driven by a relatively brief improvement in refinery margins that has since reversed. On the 24 September arb board the ARA refinery margin into New York was +$1.75 cpg for 6 to 10 October and +$1.05 cpg for 11 to 15 October, with NWE at +$3.75 cpg and +$3.05 cpg. Today the same 11 to 15 October window shows the ARA margin at -$1.65 cpg and NWE at just +$0.35 cpg, and the 16 to 20 October window has gone from -$2.00 cpg and $0.00 cpg to -$7.45 cpg and -$5.45 cpg. The blender margin, which is the incremental arb barrel, is at -$4.65 cpg and -$10.45 cpg across those two windows. The window that prompted last week’s fixing has since shut.

Fixtures over the past several days show the impact of the open refiner margins. There were several transatlantic gasoline runs, with Precious Adelaide Continent to the US at WS 155, Torm New Zealand at WS 160 and Pacific Gemini Pembroke to the US at WS 160. There continues to be steady demand into West Africa, with the High Navigator Continent to West Africa at WS 230, Hellas Marianna to Tema at WS 235 and Largo Desert to Africa Atlantic at WS 240. The MH Konpira to the US West Coast at WS 262.5 is an abnormal outlier on a long-haul routing through the Panama Canal.

Current arb margins are a mixed bag. Amsterdam to Offshore Lome gasoline remains wide open for October and November loaders, and Cartagena is open at +$9.85 cpg and +$10.00 cpg, while Amsterdam to New York gasoline is shut at -$11.75 cpg for October, -$13.20 cpg for November and -$11.35 cpg for December. Montreal is shut across the Q4 strip. The West Africa trade is genuinely strong and driving continued enquiry, but it is not enough on its own to carry TC2 at WS 245 in Q4 2026.

Q4 TC2 paper is overvalued. The spread between spot and October paper is now WS 73 points and October pricing starts on Thursday. The gasoline transatlantic arb is shut. The naphtha arbs are shut. The diesel arbs are shut. The market is heading into a traditionally weak season for gasoline demand. With the move lower in gasoline arb margins, expect tonnage demand and enquiry to tail off by the end of this week, leaving an overvalued October TC2 paper market with no demand driver.

About the Author
Michael Ryan | Commodity Owner, Freight, Sparta Commodities
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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