Is the paper market sell-off justified?

TD34 Cal27 for a non-scrubber VLCC is down 40% since Tuesday, at $134k/day. Over the same period, the spot market dropped 8%. Mid-sized crude tanker FFAs have also fallen precipitously since Tuesday. Suezmax Cal27 (TD20) is down 49%, at $44k/day. Aframax Cal27 (TD25) is down 38%, at $41k/day. Mid-sized spot markets have softened more aggressively since Tuesday. TD25 is down 39%, at $108k/day. TD20 is down 27%, at $225k/day.

We believe the sell-off of crude tanker FFAs since the US midterms elections has been overdone.

The sell-off would suggest one or more of the following is at play:

Market players are now anticipating a reduction of geopolitical risk and a normalisation of Middle East trade. Traders may be assuming a heavy Republican defeat and JD Vance’s public diagnosis that the war in Iran is to blame will push Trump into negotiating a peace settlement with Iran. There is also a perception that Democrats could use their new strength to force a reversal Trump’s Iran strategy, perhaps by cutting military funding.

This story was originally published by Breakwave Advisors. Read the full story at Breakwave Advisors →