The most destructive oil crash in a generation is giving ship owners a
billion-dollar windfall.
With the Organization of Petroleum Exporting Countries abandoning
output limits in a drive for market share, ships that carry as much as 2
million barrels a trip are in demand to haul crude from the Middle East to Asia
and North America. While oil prices fell about 35 percent in 2015, average
earnings for these carriers jumped to $67,366 a day, the most since at least
2009, according to Clarkson Plc, the world’s largest shipbroker.
“The stars are aligned for us right now,” Nikolas Tsakos, the chief
executive officer of Tsakos Energy Navigation Ltd., said in an interview at
Bloomberg’s New York offices, adding that falling oil prices will likely
stimulate demand and cargoes next year.
Tanker analysts are predicting the rate boom will persist for many of
the same reasons oil forecasters are bearish. OPEC shows no sign of reversing
its market strategy, and Iran has outlined plans to ramp up its exports once
economic sanctions against the country are lifted. At the same time, the U.S.
just repealed a four-decades old limit on its exports.
With on-land inventories already at record levels, this could mean more
barrels will eventually be stored on ships, further increasing profit, said
Tsakos.
Biggest Operators
The biggest tanker operators who manage fleets from Europe are Euronav
NV, based in Antwerp, Belgium, DHT Holdings Inc., Frontline Management AS,
which runs Norway-born billionaire John Fredriksen’s tanker fleet, and Tsakos
Energy in Greece. All have seen their shares rise this year while most energy
producers have fallen.
“We are benefiting from what is currently a challenging environment for
the energy sector,” said Svein Moxnes Harfjeld, joint chief executive officer
for DHT, in an e-mail. “We expect 2016 to be a rewarding year.”
Tsakos, whose company gained 4.3 percent in New York trading this year,
said the increase should have been higher, given that “the underlying business
is doing very well.’’ Too often, tankers are lumped in with other oil industry
services in the minds of investors, he said.
“Investors look at tankers as an oil service, which we are,” Tsakos
said. “But I think very few have identified that this side over here is the
only oil service that’s positively affected by the dropping oil prices. I hope
in the new year that this will be recognized, and our share prices are moving
in the right direction.”
Earnings to Double
While rates are forecast to slip in 2016, the ships will still earn
$46,400 a day, the second best year since 2009, according to the median of six
analysts surveyed by Bloomberg and historical data from Clarkson. The average
carrier is about 332 meters long, or almost 1,089 feet, data from IHS show. The
carriers’ earnings will more than double this year, according to analyst
estimates compiled by Bloomberg. The extra rates would work out at more than $5
billion in additional revenues if applied across the entire fleet.
“A scenario in which crude oil prices are suppressed across 2016 could
lead to a boom in tanker earnings of comparable magnitude to 2007-08,” said Tim
Smith, senior analyst at Maritime Strategies International, said in a report.
At the same time, low oil prices have served to stimulate world oil
consumption, which rose by by 1.8 million barrels a day in 2015, the highest in
five years, according to the International Energy Agency. With about 40 percent
of the world’s crude shipped by sea, that will result in 1.4 million barrels a
day more cargoes this year, according to Clarkson data.
One other factor related to the oil rout is that it’s driven down fuel prices,
further boosting tanker profits. At the start of October, earnings for Very
Large Crude Carriers, the official designation for the big tankers, exceeded
$100,000 a day for the first time since 2008, according to data compiled by
Bloomberg.
Moving forward, the carrier company Frontline expects rates to be
“firm, driven by a high supply of oil,” Chief Executive Officer Robert Hvide
Macleod said in an e-mailed response to questions. Euronav NV declined to
comment.
“The very thing which has been negative for oil markets has been
positive for tanker markets,” said George Los, a New York-based analyst for
Charles R. Weber Co. “We have seen a supply driven boost to the tanker market
which has come at the cost of the oil market.”
Source: my sanantonio. 30 December 2015
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