Tanker stocks fell sharply in the third week of 2020, but that just means investors should stock up, analysts say.
In late trading Friday, crude and product tanker shares were down across the board, closing out a weeklong side that saw International Seaways fall $2.03, or 7.57%, to $24.77 and Scorpio Tankers dip $2.86, or 9%, to $28.77.
But Greg Lewis at BTIG remains bullish after a meeting with executives from both companies and dry bulk player Eagle Bulk.
"Our biggest takeaway is that we are still in the early days of a multi-year up-cycle in the tanker industry," he wrote in a Friday afternoon note.
"We would use the recent pullback in the stocks which are down on average about 15% over the last two weeks to build long term positions."
Lewis said IMO 2020 is causing disruptions across the industry, with fuel availability varying across the world, ships being repositioned and volatility in tanker rates, but the fundamentals are still there for an upturn.
"After 3+ years of a nasty downcycle the tanker orderbook is at a multi-decade low," he said. "Public companies have shifted their focus to the resale market and not newbuilds as investors are not rewarding companies for newbuilds."
In addition to International Seaways and Scorpio Tankers, the week's biggest losers included Teekay Tankers, which fell $1.86, or 8.79%, to $19.30, Diamond S which slid $1.24, or 9.25%, to $12.17 and Frontline, which saw shares lose $1.09, or 9.16%, falling to $10.81.
Spot rates fell this week, too, with VLCCs earning 15% less week over week, falling to $61,183 per day from a 2020 average of $79,665 according to Clarksons. Scrubber-fitted VLCCs earned $76,760 per day this week, down from a calendar-year average of $98,919.
Suezmaxes fell, too, to $57,880 on average and to $66,394 for a scrubber-fitted ship, declines of 7% and 8% from the week prior, respectively.
Aframaxes, however, stayed steady, with average spot rates reported at $53,404 per day, a 2% gain from the week before. Scrubber-fitted ships in that asset class were virtually unchanged at $59,451.
