USGC Afra Market Report

USGC Aframax vessel supply in the 14-day ahead window stands at 6 ships against a 90-day moving average of 10. The supply signal remains bullish, but the more important signal today is the directional retracement in the WTI crude RBI (Relative Basket Index).

On 15 April, when the prompt count peaked at 21 open vessels, the WTI crude RBI hit its deepest undervaluation on record; a strong bullish freight signal. Since then, prompt tonnage has fallen from 21 to 6 and spot TD25 rates have rallied from WS 346 to WS 444. The WTI RBI has now retraced to +$0.93/bbl, effectively neutral, signaling that the crude economics driving the vessel supply tightening and strengthening rates are fading.

With the WTI RBI now back at neutral, the cargo demand signal that triggered the TD25 rally has dissipated. The overvalued freight RBI supports the thesis that spot rates are now approaching overvalued territory relative to global competition. The retracement of the WTI RBI back to neutral is a significant market top signal and one that typically precedes a correction in Aframax rates (7-14 days later).

Fixture activity this week has been robust, consistent with the demand signal that drove the vessel supply tightening. Angerona was placed on subs loading USG for Caribbean discharge at 550 WS for an 11 May laycan, the standout deal of the week on a shorter haul route.

The bulk of transatlantic flow fixed in the 400–440 WS range: Dubai Beauty fully fixed at 440 WS and Ardas I at 425 WS, both USG to UKC for early-to-mid May laycans, with Archangel Gabriel and P Marseille concluding at 410 WS and 400 WS respectively on the same routing for early May dates. Aretea and Flavin, both on subs for mid-May USG to UKC laycans, fixed at 420 WS and 415 WS.

TD25 paper action yesterday reflects a potential near-term top. May paper traded in a range from WS 410 to WS 420, while June saw more volatility, trading from WS 325 up to WS 345 before settling around WS 335.

WTI crude RBI predictive accuracy for TD25 price action continues to be robust. It called the tightening of the USGC Afra market when it hit record undervaluation, and the retracement back to neutral implies a top forming in rates and tightness. Owners should look to fix prompt cargoes at current levels and lock in rates. Charterers should expect more tonnage options and softer rates come mid-May.