USGC CPP Market Update

USGC MR vessel supply in the 7-day ahead window stands at 12 ships against a 90-day moving average of 11. The open vessel supply is marginally bearish, though the difference is negligible and insufficient on its own to shift the broader outlook. With incremental vessel demand registering at 6 vessels, the Freight Supply and Demand (FSD) model points bullish, forecasting rates to firm from WS 555 to WS 574 over the coming week into the 22 April to 1 May load window.

The correction in rates this week was driven by thin enquiry rather than any structural macro deterioration. Multiple offers competed for a small number of publicly quoted cargoes, resetting short-haul routes lower. USG/Caribs was put on subs at $2.7m, and then a similar cargo and route at $2.4m, some $300k below last done. USG/WC Mexico fixed at $5.25m, $500k off prior levels.

There were reportedly no fresh tests for TC14 specifically on Thursday, but sentiment softening in Europe is not helping the prompt bull case, and TC14 rates are expected to correct a bit more before owners likely push back harder. The USGC tonnage list continues to hover around the trailing 90-day average of 11 MRs this week.

The broader demand picture remains firmly constructive. Neil Crosby noted today that a Pakistan-flagged tanker became the first vessel to exit the Strait of Hormuz with a crude cargo since the US blockade began on Monday. The near-total closure of Hormuz continues to redirect Atlantic Basin product barrels eastward, sustaining the long-haul cargo demand that has underpinned USGC MR rates through recent weeks. The Australian government has also moved to secure strategic diesel reserves via shipments from Brunei and South Korea, a further signal of the scramble for non-AG supply that has kept USG export volumes elevated.

The forward arb picture reinforces the structural case for strong USGC MR rates. The Houston to Buenos Aires diesel arb is open in May at +26.80 cpg, widening through June at +24.50 cpg before closing in July. Houston to Santos diesel holds firmly positive from May through August, ranging from +11.65 to +18.30 cpg across the curve. Houston to San Jose gasoline is open from May at +3.35 cpg and widens steadily to +11.45 cpg in July, supporting continued Central and South American cargo demand.

The Houston to Rotterdam diesel arb is open through first decade May loaders, by up to +$19/mt. Paper TC14 markets have been trading cautiously this week, with May trading at WS 430 and June softening to WS 300. The open May diesel TA arb makes May TC14 paper look undervalued. Traders are likely fading the May outlook given the increased rumours of Iran conflict talks and further de-escalation.

This TC14 correction mirrors the pattern seen as recently as three weeks ago, when a brief rate pullback was met by charterers rushing to cover at a discount; rates recovered within days. With the structural demand drivers still fully in place, the Hormuz blockade ongoing, and open arbs, owners should hold firm and not discount too aggressively.