Cleaves Securities has upgraded some of its tanker names as it sees a faster-than-expected recovery in oil demand.

The Norwegian investment bank said DHT Holdings, Euronav, Hunter Group, International Seaways and Tsakos Energy Navigation (TEN) are now rated as hold, from sell.

The firm said this was mainly because their share prices had fallen to its target levels.

But Cleaves added: "We retain our view that 2021 will mark the trough, but recent data points paint a picture of a faster recovery in oil demand, and thus oil supply could recover sooner and inventory destocking would be less profound."

Cleaves had downgraded 10 of its 11 covered tanker owners to sell on 21 May, as the rate bonanza ended.

The firm had cut the sector from buy to hold in April.

This was followed on 2 June by Fearnley Securities recommending investors sell down positions in Frontline, International Seaways, Hunter Group, Ardmore Shipping and Scorpio Tankers.

Cleaves said ADS Crude Carriers — an owner of older VLCCs — remains a hold, while Frontline, Hafnia, Nordic American Tankers, Okeanis Eco Tankers and Teekay Tankers are still rated at sell.

VLCCs come under pressure

Cleaves is maintaining its target prices. The only exception is TEN, where the target price has been increased to $2.10 per share from $1.30, due to Cleaves adjusting its discount method on its preference shares from a price-to-earnings multiple of five times to eight times.

Clarksons Platou Securities said in its weekly report on Monday that VLCCs came under pressure last week as limited volumes had a more negative impact on rates than was seen in previous weeks.

"Interestingly, last week was busier than the prior two to three weeks in the spot market, with several more Arabian Gulf and West Africa fixtures reported," the investment banking arm of shipbroker Clarksons said.

"However, a growing tonnage list has brought average VLCC rates to around the $28,000 per day level — a relatively healthy level when compared with the significant cuts seen from Opec+ and non-Opec+ countries."

All other tanker segments are under more pressure, with suezmaxes and aframaxes earning $12,500 per day and $8,000 per day respectively in the spot market, Clarksons Platou said.

LR2 and MR product carriers are assessed at around $15,000 per day and $10,000 per day, respectively.

Upward trend for storage

And despite predictions of stored oil being moved in bulk off tankers, the trend remains up at around 292m stored barrels, from 287m barrels last week, according to Clarksons Research Services.

Last week was the third week in a row of rising storage levels, although current figures remain below the early May peak of 400m barrels, Clarksons Platou said.

A total of 89 VLCCs are currently being used for floating storage, up from 87 last week.

This compares to the early-June low of 79 VLCCs, but remains well behind the 103 VLCCs in early May.

"Given there is a lack of incentive to build inventories with the contango along the Brent crude curve totalling just around $2 per barrel over the first 12 months, we expect to see floating storage [and onshore stockpiles] deplete in the coming months," the company said.

Fearnley Securities assessed spot VLCCs at $21,900 per day from the Middle East Gulf to South Korea on Monday, up 0.9% from Sunday.