USGC Crude Freight Market Report

WTI crude remains by far the most competitively priced light sweet crude in the world. The WTI crude Relative Basket Index (RBI) sits at -$12.99/bbl for USGC Aframax loadings into NWE, a typically bullish signal for transatlantic cargo demand. For VLCC loadings to the Far East, the WTI crude RBI registers -$7.44/bbl, confirming US crude competitiveness extends well beyond the Atlantic Basin and into Asian discharge destinations.

Despite the that cargo demand signal, the near-term rate picture on both the TD25 Aframax and TD22 VLCC routes is constrained by the weight of available tonnage in the USGC and influx of ballasters. TD25 vessel supply in the 14-day ahead window stands at 15 ships against a 90-day moving average of 10. TD22 vessel supply sits at 4 ships against a 90-day moving average of 4, a neutral supply reading. The absence of any notable Afra or VLCC fixtures out of the USGC to UKC or FE discharges over the past week suggests that demand at these lower rate levels has not yet been sufficient to generate enquiry.

The most revealing indicator of where charterer preference currently lies is the Suezmax enquiry. Over the past week, four Suezmax fixtures were placed on subs loading the USG for UKC discharge, with Eurovision, Rhythmic, and Saturn Moon at WS 177.5, and London Spirit fully fixed at WS 175. For charterers shipping WTI crude into NWE, Suezmaxes offer a meaningfully larger parcel at a more economical rate lately compared to Afras. TD25 spot has been repricing agressively lower over the past two weeks so this dynamic could likely shift back in favour of Afras soon.

The FFA paper market reflects the divergence in forward expectations. WDF (TD25) May paper traded actively yesterday, moving from WS 350 up to WS 380 before settling back to WS 370, a bullish session that reinforces the view Afras may soon out compete Suexmaxes again. June paper held at WS 260.

For TD22, the curve runs from $58.53/mt in April to $56.48/mt in May and $50.56/mt in June, a flatter curve that reflects the absence of near-term demand catalysts even with attractive WTI. May WDF at WS 370 is above current TD25 spot at WS 333 and implying a recovery in spot business; the question is whether the long Aframax tonnage list is absorbed over the next several days given the recent preference for Suexmaxes.

The geopolitical context continues to underpin the structural WTI demand case even as the immediate freight market softens. Neil Crosby noted today that at least three container ships were hit by gunfire in the Strait of Hormuz, including an IRGC-linked gunboat attack on a vessel approximately 15nm northeast of Oman, and that Houthi forces are expected to resume attacks in the Red Sea.

The USS George H.W. Bush carrier group is reported en route to the region. This backdrop sustains the demand case for USGC crude exports at above-average volumes, keeping both the TD25 and TD22 cargo bases structurally supported even as near-term spot rates remain under pressure from supply.

With WTI the cheapest and most attractive crude globally and Hormuz structurally closed, the fundamental case for USGC crude tanker demand is not in question; it’s more the tonnage length and ballaster influx keeping a lid on rates. Owners across segments should likely hold firm on rates now and resist discounting below last done. The bottom looks to be in.