USGC DPP Market Report

USGC Aframax vessel supply in the 14-day ahead window stands at 16 ships against a 90-day moving average of 9, placing prompt availability 7 vessels above average, This is the dominant bearish signal in the market right now. The WTI crude RBI (Relative Basket Index) is at a record -$26.17/bbl undervaluation, reflecting WTI’s extreme competitiveness relative to other crude grades delivered into NWE. This bullish demand signal is being overwhelmed by the scale of the vessel supply overhang.

The key structural explanation for why WTI economics have not translated into Aframax fixture flow is that VLCCs are absorbing the bulk of USG crude export demand. Front Tyne and Front Dynamic both placed on subjects loading USG for the Far East at $18m lumpsum for May laycans, and New Vitality placed on subjects loading USG for China, all in the last two days, while zero Aframax fixtures have cleared in the same period.

Charterers are demonstrably preferring VLCC economics for long-haul WTI exports, which is crowding out Aframax demand despite the compelling crude econs. With the prompt Aframax count having jumped from 3 ships to 16 over the past ten days, the tonnage list has rebuilt sharply and owners lack the Afra enquiry needed to clear it.

The freight RBI is overvalued relative to global competition; USG Afras remain expensive. Spot TD25 sits at WS 440, which the FFA market has been aggressively repricing lower. On Monday, WDF balmo paper traded at WS 400, May traded from WS 285 down to WS 265, while June to WS 185. The May paper weakness is a direct reflection of the market pricing in the tonnage build and absence of Aframax fixing.

The medium-term picture for WTI cargo demand remains structurally supportive freight demand. USG crude is fundamentally cheap into NWE, so there is a floor to how much lower charterers can push down rates before Afra econs become compelling again. Macro volatility continues with the prospect of fresh US-Iran negotiations before the April 22 ceasefire expires and the US blockade going into effect. For now, the WTI cargo demand tailwind for TD25 remains in place. VLCCs are the more economic choice even with only one open in the 14-day window.

With Afra freight overvalued, vessel supply running well above the 90-day average, and VLCCs capturing the incremental WTI export flow, the near-term outlook for TD25 is weak. Owners face a difficult market until the Aframax list clears and Aframax-specific cargo enquiry resumes. The structural attractiveness of WTI has not disappeared though, so it’s likely just a matter of time before weaker Aframax rates re-incentivizes the segment.