Crazy, astronomical, unreal. Call the recent rally in the tanker market whatever you like, with the recent spate of geopolitical strife supercharging a sector already on the upswing, analysts told TradeWinds.
"It's been a tough decade," said BTIG analyst Gregory Lewis. "We were due for a little bit of a pick-up in rates just from the cyclical nature of this industry. All these other things are just adding to the magnitude of the upside."
On Friday, the Baltic Dirty Tanker Index hit 1941 and VLCC rates shot up over $300,000 per day — figures not seen since 2008 — on news from Iranian outlets that the Islamic republic's 160,000-dwt suezmax Sabiti (built 1999) was struck with two explosions near Jeddah.
Rates had already made enormous gains in the days and weeks prior thanks to September attacks on Saudi Arabian oil processing facilities and US sanctions against Chinese companies for alleged business dealings with Iran.
The attacks knocked out 5% of global oil refining capacity and the sanctions sent charterers fleeing from Cosco Shipping Energy Transportation, as two of its subsidiaries were blacklisted.
The news also pushed tanker stocks higher, with Nordic American Tankers, Euronav, International Seaways, Tsakos Energy Navigation, Diamond S, Frontline, Teekay Tankers, DHT, Ardmore Shipping and Scorpio Tankers all hitting 52-week highs in midday trading.
Since Monday, Nordic American Tankers shares shot up 34% to $4.13, Diamond S and Teekay Tankers 11% to $15.37 and $1.97 respectively and Tsakos 13% to $3.76.
Lewis said a catalyst like the current geopolitical tensions had not been seen since the Suez Crisis.
"It really is unprecedented," he said.
Both Lewis and Jefferies analyst Randy Giveans said the rally was likely sustainable. Lewis because the industry was entering a cyclical recovery and Giveans because of the fundamentals.
Giveans said the orderbook is low, demand increasing and IMO 2020 regulations are coming online in January.
He said he does not expect rates to continue their steep upward trend, but "it's not a two month thing".
"This is certainly longer than that," Giveans said. "Is it three years? Probably not, but somewhere in the middle for sure."
