freight rate negotiated for ‘prompt’ ships and cargoes
spot market that owners and charterers deal with day by day
a farmer when he arrives at market with his pig
The owner can ‘fix’ at the rate on offer, or sit and lose money.
Charterers with cargoes face the same choice. 75 cargoes => D1
as the freight rate rises => it curves to the left 83 ships => S
It slopes gently up from 15- 21 cents a barrel until all 83 ships are contracted
and then it goes vertical => equilibrium : 75 cargoes equates to 20 cents a barrel