USGC MR TC14 Market Update

USGC MR vessel supply in the 7-day ahead window stands at 13 ships against a 90-day moving average of 12, essentially a neutral. Incremental demand is running at +3 vessels, tipping the balance in favour of owners into the 24 Mar to 2 Apr load window. The model reflects this, with spot TC14 at WS 402 and the 7-day ahead forecast pointing to WS 411.

President Trump signed a 60-day Jones Act waiver yesterday, wider in both scope and duration than parts of the market had anticipated, covering all products rather than just crude. Philip Jones-Lux noted that the likely immediate freight impact is less dramatic than anticipated. Houston to New York earnings should only marginally narrow on a $90k/day TCE basis, but the PADD-5 route is more meaningful, with Houston to LA around $4.0m versus Jones Act economics of $4.83m.

Distillates are the most viable product to move on the waiver given elevated PADD-1 and PADD-5 premiums, while the RBOB USGC to NYH gasoline arb remains around 12 cpg out of the money and is unlikely to open without further spread widening. Alkylate flows from P3 to P5 may be the more viable first mover given octane tightness.

Yesterday TC14 traded at WS 397.5 and inched back to WS 405 on a tighter vessel supply, with fewer owners willing to leave the region unless heading Far East at $6m or above. Fixture activity over the past seven days reflects conviction on both short and long-haul routes. Boxer was placed on subs for East at $6.4m lumpsum and Aquila L was fully fixed for Chile at $4.275m. Lucky Trader was fully fixed USG to UKCM at WS 405 and Cs Zhe Jiang fully fixed Texas City to UKCM at WS 397.5, both confirming the current transatlantic levels. Gem Ruby on subs USAC to UKCM at WS 450 showed further firmness on that routing, but is the outlier rate wise for the moment if she gets fully fixed.

Phil noted this should be net bullish TC14 as non-US flagged tonnage currently deployed on LatAm routes could pivot to PADD-1 or PADD-5 if economics are right, and the 60-day duration makes vessel repositioning more commercially attractive. I agree. The key factor to watch is the degree to which Jones Act demand draws tonnage out of the international export market.

On the broader implications, Phil flagged a significant tail risk: “this can be seen as a first, soft attempt to manage US domestic prices — as and when this fails to bring down pump prices and the political cost of higher oil prices rises, the market is likely to become more and more wary of harder measures, including potential export bans on products.”

The forward arb picture provides selective support with Houston to San Jose gasoline open at +12.45 to +$8.35/cpg from April through June, and Houston to Buenos Aires diesel open in April at +13.10/cpg. Houston to Rotterdam diesel remains firmly shut mainly due to HOGO levels.

The TC14 FFA forward curve prices sharp backwardation from April at WS 364 through to August at WS 192. The market views current elevated spot levels as crisis-driven rather than structural. There are no material signs of de-escalation though and the impact of the conflict will be felt for longer with each passing day. This should translate to the TC14 forward curve rolling up toward spot rates narrowing the spread. Owners remain in control. Watch for US headline risk related to export curbs.