OPEC boosts tankers
OPEC’s decision not to cut production to prop up the oil price means investors should turn to the tanker market, analysts say.
All eyes were on the cartel’s latest gathering as experts had singled out uncertainty over the outcome as a reason for not investing in tanker stocks at a time when charter rates are running hot.
Eirik Haavaldsen of Pareto explained: “Oil prices crashed yesterday as a consequence of OPEC’s decision to go ahead with market shares rather than be willing to cut back production in order to stimulate the prices that already were in free fall.
“While this was not entirely unexpected, we believe investors should now focus on tankers – both crude and product – as seemingly permanently lower oil prices are likely to stimulate global demand.”
Nikolas Tsakos and Herbjorn Hansson have been the most vocal of the public tanker owners stressing the decline in shipping stocks along with the oil price is illogical with rates on the rise.
“Recently, rates across the board have surged, with share prices failing to reflect this,” Haavaldsen said today.
“We see further upside in tanker rates both near- and longer term, which should lead to asset value appreciation and higher share prices.”
The analyst says the “VLCC-snowball started to roll” and he is positive about the market for the winter season.
OPEC’s latest gathering had been a hot topic in shipping, with Clarksons Capital Markets’ analyst Omar Nokta telling TradeWinds it would attract his attention even during Thanksgiving dinner.
Eirik Nikolai Stevseth of Arctic Securities spelled out the post-meeting state of play to investors this morning.
“We’ll keep saying it ‘till you get bored; crude tankers are ‘printing’ cash,” he said.
“Yesterday’s decision by OPEC to not cut their production ceiling should be positive news for the crude tanker space as volumes will keep flowing.”
Previewing the meeting earlier this week, Jonathan Chappell of Evercore noted the crude tanker market is already in as a “strong cyclical upturn” that has seen rates for tonnage trading in the spot market exceed levels recorded over the better part of the past four years through much of 2014.
“And, without a large oil supply cut and the potential for an increase in trade flows coming from US exports, we believe the upturn could last much longer than the skittish equities currently indicate,” the analyst said.
.Tankers Andy Pierce in London
28 November 2014
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