Shares in tanker owners were amongst the hardest hit in another bloody day for shipping investors in the US.
Frontline shares ended the day down 12.7% to $6.70 as markets reacted to the decision by OPEC+ to cut oil production by a further 1.5 million barrels per day (bpd).
Tsakos Energy Navigation saw 11% wiped off the value of its shares, while VLCC pure-play DHT Holdings lost almost 10% to end the day at $4.91 per share.
OPEC ministers said on Thursday they would recommend to OPEC+, a group that includes Russia, that additional oil production cuts of 1.5 million barrels per day (bpd) run until the end of 2020 rather than just during the second quarter, reported Reuters.
In a statement issued after informal talks that followed the official OPEC ministerial meeting in Vienna, the group said it had “decided to recommend extending the duration of the proposed 1.5m bpd additional adjustment until the end of 2020, instead of 30 of June 2020.”
Negative for tankers
Fearnley Securities said the OPEC+ cuts surprised the "market both in terms of size and duration."
Analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said: "We had expected a 0.5m to 1m bpd temporary cut during the virus period, which would be reversed when the outbreak eases.
"Instead, OPEC+ has recommended a 1.5m bpd cut throughout 2020, although this hinges on Russia coming alone for a 0.5m bpd reduction."
They added that, should this materialise, the market would be looking at significant stock draws in the second half of 2020, even if demand did not recover.
The International Energy Agency's (IEA) current demand estimates are for 1.3m bpd on average for the second half of 2020, while a 1.5m bpd OPEC+ cut would result in a draw of 2.4m bpd, or 1.1m bpd in a zero demand growth environment.
"This is obviously negative for the tanker market as well, now having lost circa 5m bpd of OPEC crude since 2018," Fearnley said.
"In the short term, partly compensating for this shortfall will be a low fleet growth into the summer. Any clues on how this plays out on the export side will be evident from March/ April fixing programs in the coming weeks."
Product tanker and LNG shares hit
In the product tanker space shares in Scorpio Tankers dropped over 9% to close in New York on Thursday evening at $16.54 per share.
LNG and LPG shipowners were not spared the brutal sell-off either, with Dorian LPG down 8.7% to $9.92 and GasLog down 8.5% to $4.86.
Eagle Bulk, which recently reported earnings below consensus, also saw its shares punished with the stock down over 12% to $2.96 per share.
The S&P 500 Index fell more than 3%, with investor confidence shaken as virus cases continued to rise across the US despite efforts to contain the outbreak and its impact.
On Thursday, Greece confirmed 21 new coronavirus cases, detected among travellers who had recently returned from a pilgrimage to religious sites in Israel and Egypt, the health ministry said. The total number of cases now stands at 31.
