BTIG’s Greg Lewis has upgraded International Seaways to a buy rating, believing the VLCC recovery is in full effect.

The analyst gave the New York-listed tanker giant a $30 price target as oil production ramps up and demand firms.

He said that while there is still time before the market hits its seasonally-strong winter period, the $400 to $500 per tonne spread between high-sulphur low-sulphur fuel oil suggests International Seaways’ scrubber-fitted VLCC fleet could earn as much as $40,000 per day.

“Bottom line: we believe the worst is in the rearview mirror for crude tankers ... and expect a gradual melt up in rates into 2023,” Lewis wrote.

Lewis added that Middle East oil production was up 600,000 barrels per day from December, the equivalent of 15 VLCCs, while VLCC spot fixtures out of the Middle East Gulf were up 12% month-over-month in July with spot fixtures rising.

He said International Seaways already benefits from a strong MR tanker market — which the Baltic Exchange said on Tuesday were earning $40,825 per day in the Atlantic and $55,576 per day in the Pacific — and that the additional good news should boost its fleet of 10 VLCCs.

The gap between non-eco, non-scrubber fitted VLCCs and those with more economical designs has grown considerably. Clarksons said in its weekly note average VLCC earnings were at $12,316 per day last Friday, while the average eco-designed VLCC was earning $20,958 per day.

The average scrubber-fitted VLCC was fetching $34,413 per day, while the average eco designed VLCC with a scrubber was bringing in $40,901 per day.

Lewis’ upgrade comes as VLCC rates have shown steady improvement over the last several weeks.

After the Baltic Exchange's VLCC time charter equivalent assessment hit an all-time low of -$34,845 on 31 May, earnings have followed a steady upward trend.

On Tuesday, the assessment inched closer to zero — a mark it has not eclipsed since January 2021 — rising $637 to -$1,915 per day.

International Seaways shares closed up $0.11 to $22.51 on Tuesday, rising another $0.26 to $22.77 in after-hours trading.