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The brokerage predicts that oil tanker profits will soar this week.
Ship broker Cleaves Securities no longer recommends its customers buy tank stocks, but rather hold them, according to an analysis conducted in early April.
China Stringer Network / X03234
published:,
The sharp drop in oil prices yesterday significantly raised the shares of oil tankers on the Oslo Stock Exchange on Tuesday. This is on an otherwise negative Oslo stock exchange, where the main index was down 1.6 percent.
This is what it looks like after 45 minutes of trading:
- Frontline up 9 percent
- Hunter Group up 7 percent
- ADS Crude carriers increase 5 percent
- Okeani’s Eco Tanker is up 7 percent
- Hafnia Limited up 17 percent
John Fredriksen’s Frontline is among the most heavily traded stocks on the Stock Market on Tuesday.
Bet on floating stocks
The collapse of the price of oil is due to expectations of complete stocks on land.
Investors are now betting that the tankers will be used largely to store all the oil.
A decisive factor in determining whether so-called floating stocks work is whether future oil prices are higher than they are today. In such a situation, which in professional language is called “contango”, one can store oil and sell it more expensive in the future.
Contango is now high due to the current uncertainty surrounding low demand and the lack of places to store all the oil produced. It has helped to update the tanker market in recent months.
Track the mighty speed jump
Profits for tankers in the spot market on Monday were $ 190,000 for the largest ships, the so-called VLCCs.
Kepler Cheuvreux writes in an update Monday night that the brokerage believes there is a real probability of VLCC rates of over 300,000 per day this week as a result of the oil situation, and believes “we are still only at the beginning” , according to Infront TDN Direkt.
“For every dollar with the highest contagion, you can pay around 65,000 a day for a VLCC. If it had been possible to obtain oil at -37 dollars at sea, a trip to Asia would have paid the full value of the ship. Of course, there will be much lower rates at some point, but at current rates, tank stocks are trading at a P / E of 1-2 times, ”the brokerage writes.
Price / earnings, abbreviated P / E, is one of the most widely used targets for evaluating stock prices.
Kepler Cheuvreux has a buy recommendation on Frontline with a target price of NOK 160 per share, according to Infront TDN Direkt. The action follows the opening of the stock market on Tuesday at NOK 112.
