Week 1: Crude Tanker Industry Update

Transcription

1 Week 1: Crude Tanker Industry Update By S ue Goodridge Jan 11, :51 PM Week 1: Crude Tanker Industry Update Week 1 In week 1 of 2018, which ended on January 5, 2018, the BDTI fell significantly to 680 from 827 on December 22, The BDTI gives us an idea about which direction crude tanker rates are heading. The index fell 18% compared to the BDTI at the end of Since the crude tanker industry is seasonal, it s important to look at the BDTI s yearly performance. The BDTI was at ~1,055 during the same period last year. In week 1, the index was 35% lower year-over-year. Weekly performance Crude tanker stocks had mixed returns in week 1. Teekay Tankers and Gener8 Maritime Partners traded in the red, while its peers traded in the green. The following are crude tanker companies stock returns for week 1 of Teekay Tankers (TNK) fell 4.93%. Nordic American Tankers (NAT) rose 0.78%. Tsakos Energy Navigation (TNP) rose 0.51%.

2 Gener8 Maritime (GNRT) fell 0.3%. Frontline (FRO) rose 8.3%. Euronav (EURN) rose 0.54%. Navios Maritime Midstream P artners (NAP) rose 1.66%. In the same week, the SPDR Dow Jones Industrial Average ETF (DIA) rose 1.85%. Series overview In the next part of this series, we ll see how 2018 has started for crude tanker rates. We ll see where bunker fuel prices are heading as oil prices touched a three-year high. We ll discuss how UBS downgraded one of the crude tanker companies. Crude Tanker Rates: 2018 Hasn't Started on a Good Note VLCC rates According to Weber s report for week 1 of 2018, VLCC (very large crude carrier) rates continued to sour due to the rising level of surplus availability in the Middle East market. Demand continues to be dull. The surplus VLCCs in the Middle East at the end of January is projected to be 29 the highest level since September According to Weber s report, in week 2 (week ending January 5, 2017) VLCC rates will continue to fall.

3 According to Weber s week 1 report, VLCC rates for the route from the Arabian Gulf to China fell to $12,460 per day on January 5, 2018, from $13,812 per day on December 29, The average rate for all VLCC routes fell to $13,123 per day on January 5, 2018, from $14,603 per day on December 29, The current rates are 72% lower year-over-year. DHT Holdings (DHT) and Euronav (EURN) mainly operate VLCCs. Suezmax rates According to Weber s weekly report, Suezmax demand in the West African market fell for the third consecutive week. According to the report, the Suezmax rates on the route from West Africa to the United Kingdom fell from $13,850 per day on December 29, 2017, to $5,152 per day on January 5, The average rate for all Suezmax vessels fell to $7,816 per day on January 5 from $14,603 per day the previous week. Nordic American Tankers (NAT), Teekay Tankers (TNK), and Tsakos Energy Navigation (TNP) have Suezmax vessels in their fleets. Aframax rates The Aframax rates on the C aribbean route fell to $15,225 per day on January 5, 2018, from $16,691 per day on December 29. The average rate for all of the Aframax routes fell to $8,234 per day from $11,705 per day. Oil Price Reach 3-Year High: What about Bunker Fuel Prices? Looking ahead Previously in this series, we discussed that crude (DBO) tanker stocks were mixed in the week ending January 5, VLC C (very large crude carrier), Suezmax, and Aframax rates fell. In this part of the series, we ll see how crude oil and bunker fuel prices fared in the first week of 2018.

4 Oil prices Crude oil prices rose to a three-year high on January 3, Anti-government protests in Iran and a blast of cold weather raised concerns about potential supply disruptions. Brent crude oil prices traded at $67.93 per barrel, while West Texas Intermediate crude oil rose to a high of $61.8 per barrel. Bunker fuel prices On January 4, 2018, the average bunker fuel price was $431 per ton compared to $413 per ton on December 21, According to the Gibson report for week 1, bunker fuel prices at Rotterdam were $367 per ton on January 4, 2018 compared to $353 per ton the previous week. Bunker fuel prices at the Port of Fujairah rose to $388 per ton from $370 per ton two weeks ago, according to the same report. Which companies were impacted? Industries that transport commodities on ships incur bunker fuel costs. These industries are LNG (liquefied natural gas) carriers, product tankers, dry bulk carriers, and crude oil tankers. Bunker fuel prices are closely related to oil prices. Some of the major crude oil tanker companies are Nordic American Tankers (NAT), Frontline (FRO), Gener8 Maritime P artners (GNRT), and Euronav (EURN). GasLog (GLOG) and Hoegh LNG Partners (HMLP) are LNG carrier companies. Navios Maritime Partners (NMM) is a major dry bulk shipper. UBS Downgraded Gener8 Maritime Partners

5 Revisions In the week ending January 5, 2018, UBS revised its recommendation for one of the crude (DBO) tanker companies. UBS On January 4, 2018, UBS downgraded Gener8 Maritime P artners (GNRT) to neutral from buy and raised the target price to $6.75 from $6.5. Consensus ratings Of the nine analysts covering Nordic American Tankers (NAT), only one analyst gives a buy recommendation. About 55% of the analysts are neutral, while 33% are bearish. The consensus target price is $3.74, which implies a potential upside of 45.5% from the market price of $2.57 on January 8, Six analysts gave recommendations for Frontline (FRO). Of the analysts, 17% are bullish on the stock, ~67% are neutral, and 16% are bearish. The consensus 12-month target price is $5.58, which implies a potential upside of 14.6% from the market price of $4.87 on January 8, Seven analysts gave recommendations for Gener8 Maritime P artners (GNRT). Of the analysts, 57% are bullish and 43% are bearish on the stock. The consensus 12-month target price is $6.6, which implies a potential upside of 2% from the market price of $6.47 on January 8, For Teekay Tankers (TNK), 12 analysts gave recommendations. Of the analysts, 33% are bullish, 50% are neutral, and 17% are bearish on the stock. The 12-month consensus target price is $2.02, which implies a potential upside of 55.4% from the market price of

6 $1.3 on January 8, 2017.