Potential supervisor replied but did not explicitly say if he is ready to supervise
I think the suggestion in the comments is reasonable, but for the sake of providing an answer in the answer section, I will present an alternative.

Yes, list him on the application. What's the worst that can happen? 


If he will supervise you, then there is no issue.
If he does not want to supervise you, he cannot raise a stink without looking like an idiot, since he wrote "please go ahead and apply."


I think the most pertinent take-away from his message is that there is only one opening in the stream. My guess is that he is planning to supervise whoever gets that spot (it sounds like that spot will be pretty competitive, so whoever gets it is likely to be pretty good).