An uptick in rates following a slow summer translated into gains for US-listed tanker stocks last week and investment bank Jefferies expects more to come.
Tanker stocks gained 7% last week after the Baltic Dirty Tanker Index lifted more than 3% over the same period, helping the 30 shipping stocks under Jefferies' coverage to an overall 3.2% gain.
Tanker listings made up four of the top six spots in weekly performance, said Jefferies lead shipping analyst Randy Giveans.
"With tanker rates moving higher and investors gaining more confidence in what should be a strong fourth quarter for the shipping sector as a whole, we expect a catch-up trade from now until year end, especially with high quality names still trading at massive discounts to NAV," Giveans told TradeWinds.
There has been some debate whether the tanker market can count on the usual fourth-quarter rates rally given a volatile market that saw record high rates in the year's first half on floating-storage contracts, followed by a pattern of inventory destocking that is expected to continue for some time.
Stronger rates coming?
"I do expect much stronger rates in the fourth quarter relative to the third, although they probably won’t match the record-setting rates of fourth-quarter 2019," Giveans noted.
"That said, the market seems to be pricing in VLCC rates below $30,000 a day for the foreseeable future, so rates getting up to $40,000, $50,000, or even $60,000 a day should push the tanker equities much higher from the currently depressed levels."
Scorpio Tankers was the top gainer in the tanker group and second overall with a 14.8% surge after it announced more debt reduction, a $250m stock buy-back authorisation and a third-quarter rates guidance that was above some expectations.
Momentum
The world's largest product tanker owner was followed by Euronav with an 11.6% gain, Diamond S Shipping with an 11% climb and DHT Holdings with a 10.1% upsurge.
For the second straight week, shipping's top overall gainer was Golar LNG, which is continuing to feel momentum from its planned IPO spin-off of its Hygo Energy Transition arm. Golar LNG soared 15.7%.
The top average performance by sector came in containerships, which put on 8% due to what Giveans called "an ongoing improvement in short-term charter rates".
Dry bulk shares traded flat on the week, while the gas sector was split, as LNG names climbed an average 2% and LPG listings fell 3%.
