While short-sighted money managers and speculative traders on the high street are busy talking up the oil and tanker markets on the basis of the latest fake news, owners and operators on main street are scrambling to fix a six- to 12-month time charter deal to obtain a daily hire which will just about cover all costs.
After the massive joyride back in Q2, every owner now battens down the hatches. But in a market where most deals are done on spot terms, there is only so much you can do.
One thing you can do is bring in fresh cash to secure liquidity and weather the hardship that lies ahead. As Splash Extra notes from the fall and rise of share prices on the New York Stock Exchange in the past six months, there is so much cash around with nowhere to go. This has revived the Norwegian capital markets too.
Most recently, Scorpio Tankers is now tapping into the bonds market – realising that it is not time to deceive new shareholders. Having seen its share price drop by 75% in 2020, it is now trading below 50% of the company’s net asset value (NAV) – for whatever the latter measure is worth.
Basically, all shipping companies trade below NAV all the time, and the ‘steel’ is never realised anyhow. Please note that: Proceeds from the potential bond issue will be used for general corporate purposes.
Last month, Splash Extra rhetorically asked: How stupid do listed companies think shareholders/investors are? As thick as two short planks, apparently!
As the oil refinery maintenance season is upon us, this year the low crude runs will mostly occur because refiners are reluctant to keep adding to the glut of various out-of-demand products, as the ‘cut of the oil barrel’ cannot be changed by much. If the refiner wants to produce more in-demand gasoline as road traffic has recovered the most, they are adding to the glut of jet fuel at the same time.
In US, refiners get 49% gasoline from a barrel of oil, 25% diesel fuel, 9% jet fuel, 4% of pet coke and 13% other products.
The big question: as summer turns into autumn in the northern hemisphere, will we ever know if the IMO 2020 global sulphur gap only meant that cargoes shifted from being dirty into being clean – leaving the upside purely to be a question of which refiners produce it now and earlier? Splash Extra sincerely doubts it.