Talk of tankers hitting a cyclical inflection point increase

Analysts are increasingly talking about tankers having hit rock bottom with the best time to pile into the sector being right now.

Cleaves Securities is the latest to posit this theory, suggesting oil tankers are now experiencing a “cyclical inflection point”.

“Spot and period earnings are still lacklustre, but asset prices are appreciating in concert with investors’ optimistic expectations as oil demand is seeing a post-pandemic recovery,” Cleaves stated in a new report.

With oil tanker equities priced at a 19% discount to NAV at the cyclical trough, Cleaves has reiterated its buy recommendation.

“Oil prices are elevated amidst a tight oil supply cooperation and the global oil inventory draw cycle seems now to be behind us,” Cleaves stated, going on to highlight the recent positive news from OPEC+ as well as the tanker orderbook, which now stands at only 8.5% of the fleet, which besides some variations over the past year is the lowest level since 1997.

Cleaves is forecasting only 2.4% fleet growth in 2022 and 1.9% in 2023 while it has a demand growth forecast of 11% in 2022 and 5.4% in 2023. The Norwegian analysts expect fleet utilisation to “surge” from 77% in 2021 to 87% in 2023.

Also keen to highlight the tanker cyclical inflection point this month has been Evercore ISI, who as well as noting the low orderbook, pointed out in a recent note to clients that scrapping has accelerated and is now up 200+% year to date on 2019 and 2020 levels, and asset values are up 10-27% from the start of the year.

However, providing a dampener to this positive outlook are the soaring cases of Covid.

“With many countries around the world experiencing a sharp increase in Covid cases and several going into strict lockdown the demand for gasoline, diesel, and especially jet fuel will remain muted going forward. A Q3 recovery is now looking unlikely and if this extends into Q4 this could see weakness on spot and period markets continue for the balance of the year,” Braemar ACM warned in a recent report.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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