DNB Markets expects tanker stocks to enjoy a better period in the next two and a half years given the belief “all bad news has happened”.
Analysts led by Nicolay Dyvik note inventory drawdowns, Opec cuts, low scrapping and reduced floating storage have all taken place in this cycle.
“We argue there are several positive catalysts over the next 2.5 years,” Dyvik and colleagues Jorgen Lian and Mats Bye wrote in a report, suggesting this will fuel buying interest in tanker stocks.
They count 27 VLCCs scrapped so far this year, which has eaten into the oversupply the bank put at around 55 of the tankers at the start of this year.
At the same time, new sanctions on Iran will likely take tonnage out of the market.
“Iran owns 38 VLCCs and during previous round of sanctions as many as 25 VLCC equivalents were used in storage compared to one vessel today, according to Bloomberg,” they wrote.
“Hence US sanctions could lead to an increase of floating storage further reducing the overhang of vessels.”
On the demand side, DNB Markets says oil price levels will support production increases, while draws on OECD commercial oil stocks are also set to offer assistance.
“We argue the inventory draw cycle will continue into H2 2018, but at some point the oil curve would flip to contango and again incentivise inventory build and would additionally lead to natural inefficiencies in the fleet,” the analysts said.
