With the US and China appearing ready to ink a trade deal, tankers and gas could be sneaky beneficiaries.
"The [agricultural] component of the reported deal clearly directly benefits Dry Bulk shipping, though we believe a more meaningful benefit could occur in the LNG and oil markets," wrote Evercore's Jonathan Chappell in a note Friday morning after news broke that the two countries had agreed to terms on a limited trade deal.
The shipping for oil and gas were not meaningfully impacted by the escalating tit-for-tat sanctions the duo levied on one another beginning last year — China was not buying much US oil and LNG shipping rates were mostly immune from the surcharges — but a deal could be another positive in improving markets.
"The tanker market has done just fine this year without U.S. oil flowing directly to China, as rates have averaged the highest in 4 years and have periodically spiked to decade highs," Chappell wrote.
"The return of long-haul U.S. crude oil volumes to China would only be supportive to the already-strong market conditions in this sector".
LNG would benefit primarily from liquefaction projects moving forward.
The number of LNG projects coming online is expected to be a boon for gas carrier owners, with the number of cargoes outstripping carrying capacity.
"The Chinese are the world’s largest marginal consumers of natural gas and the U.S. is the largest marginal producer/exporter of natural gas," Chappell wrote. "A resumption of trade between these two nations is a definitive win-win scenario, as China would save money on clean energy and the U.S. would receive a new massive export revenue stream."
