Shares of the two US-listed product tanker pureplays have lifted to 10-week highs on the back of upbeat notes from prominent equity analysts.
Scorpio Tankers, the world's largest product tanker owner, closed at $18.23 on the New York Stock Exchange on Tuesday, the highest closing price since 12 July.
Meanwhile Ireland-based Ardmore Shipping closed at $4.12, its highest closing since 6 July.
Both shipowners logged big gains on high shares volumes on Monday, the day positive notes on the clean products sector came from analysts Omar Nokta and Frode Morkedal of Clarksons Platou Securities and Jonathan Chappell of Evercore ISI.
Scorpio shares soared nearly 9% on volume of 1.4m shares, well over its average trading volume of 894,000 units.
Ardmore jumped 8% on volume of 1.3m shares, more than four times its trading average of 280,000 units.
Product tanker owners can expect a "big winter rally" and a strong jump in earnings potential as demand recovers from pandemic setbacks, Morkedal and Nokta told clients.
Clarksons Platou initiated coverage of Denmark's Torm and Hafnia Tankers with "buy” ratings, while maintaining the same ratings on Scorpio and Ardmore.
More support came from Chappell in a brief client note that focused on the drawdown of refined product inventories.
Evercore cited reports that oil product stockpiles at the key port of Fujairah were the lowest on record, while weekly US Department of Energy figures show that gasoline and distillate inventories were 3% and 14%, respectively, below seasonal five-year averages.
Chappell also cited International Energy Agency data showing OECD refined product inventories to be below pre-Covid levels and well below five-year averages.
"All told, at a certain point, inventories approach a level where there is no longer much slack in the system, and not only does incremental demand require new production-output, which directly correlates to shipping ton-mile demand, but the stockpiles also need to be replenished," Chappell wrote.
He pointed out that such inventory drawdowns were critical to Evercore's thesis in May — a call he now admits was early — as to the inevitability of a long-awaited tanker market rebound.
"This is not to say inventories will not trend even lower in the coming weeks, but at some point the spring will be coiled so tight that the ton-mile response will be dramatic. With 25-year low capacity orderbooks, you’ll want to be there for when that spring releases," he wrote.
