One of the stranger pieces of news that came over the wire last week, was the fact that the world’s Ocean going supertankers are sailing at the fastest speeds in 2.2 yrs as a collapse in Crude Oil prices spurs demand for cargoes and drives up daily returns owners can make from deliveries.
Very large Crude Oil carriers, each about 1,000-ft long and able to transport 2-M bbl of Crude Oil, sailed at an average of 12.57 knots this month, according to data from RS Platou Economic Research, an Oslo-based firm. The fleet, whose steel weight is about 27-M tonnes, last moved that fast in August 2012.
Equally of interest is that tanker rates have grown on signals that China accelerated purchases of Crude Oil to fill its stockpiles with cheap Crude Oil after Brent Crude, the global benchmark, collapsed last year.
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These massive ships earned an average of more than $71,000 a day since the start of January, the best start to a year in Baltic Exchange data that begin in mid-2008.
“Freight rates are high because there’s a lot of oil trade at the moment,” Frode Moerkedal, an Oslo-based analyst at Platou Markets, an investment adviser linked to the research company, stated recntley. “OPEC has refused to cut production so there’s more Oil being shipped.”
VLCC speeds from 14-to-16 Feb. were 6.7% higher than 14-to-16 November., according to Platou.
The speed for the ships when voyaging without cargoes rose 10% over the same period to 13.31 knots. The daily average rate to hire a VLCC on the benchmark Middle East-to-East Asia route was $71,772 so far in Q-1, compared with an average of $47,614 in Q-4 of Y 2014, according to Baltic Exchange data.
Falling Crude Oil prices encouraged shipment volumes: VesselsValue Ltd., a London-based firm that provides shipping data, also estimates VLCCs are sailing at the fastest since Y 2012. The acceleration is in part because falling oil prices have cut bunker fuel costs, which these ship use to power their engines, which has made it more profitable for owners to transport cargoes in as short a time as possible.
So, here is a stock sector of the market that has been depressed lately, and an industry which is now seeing lower operating costs from fuel savings, similar to the airline industry which has performed very well the past few months. And its an industry that IS also enjoying higher rental rates.
The Big Q: Can a significant uptrend in theses stocks be far off?
Larger Vessels, Mergers Dominate: There’s also consolidation accruing in the industry as noted by Knightsbridge Shipping Limited (NasdaqGS:VLCCF ) which has announced the date of its Special General Meeting of Shareholders to approve the previously announced merger with Golden Ocean Group Limited.
Looking ahead, MIDF Investment Research expects that the Baltic Dirty Tanker Index will trend higher due to continued weakness in Crude Oil prices. This encourages seaborne trade activity. Also, a colder-than-expected winter season in the Northern Hemisphere could create a situation similar to the end of Ys 2013 and early 2014 when the index soared to record highs. And the US reached a breakthrough in legislature. It allowed the export of Crude Oil for the 1st time in almost 40 yrs.
Some of the stocks in this sector worth a look include: DHT Holdings (NYSE:DHT), Euronav (NYSE:EURN), Dorian LPG (NYSE:LPG), Gaslog (NYSE:GLOG), Navios Maritime Holdings (NYSE: NM), Safe Bulkers (NYSE:SB), Seaspan Corporation (NYSE:SSW), Scorpio Tankers (NYSE: STNG), Star Bulk Carriers (NASDAQ: SBLK), Tsakos Energy Navigation, Ltd. (NYSE: TNP) and a low cost trade opportunity, Dry Ships (NasdaqGS: DRYS).
The Guggenheim Shipping exchange-traded fund (NYSEArca:SEA) can also be used to help investors keep track of the shipping industry dynamics and is a tracker of shipping companies. And option trading is available for this ETF.