Crude tanker share prices are rising this week as the prospect of a second wave of storage deals comes into focus.
This is despite general falls in stocks in the US on Tuesday, with the Dow Jones average down 2.25% at the close.
Suezmax specialist Nordic American Tankers rose 3.25% in New York, and International Seaways put on 1.25%.
In Oslo on Wednesday morning, Frontline was trading up 6.8% and ADS Crude Carriers was 4% to the good.
Belgian VLCC and suezmax giant Euronav added 3% in Brussels, while some product carrier companies were also gaining. Torm was up 2% in Denmark and American Shipping Co 3% in Oslo.
Other product and chemical carrier companies were faring worse, however, with Nordic Shipholding, Odfjell, James Fisher and Team Tankers all falling.
Scorpio Tankers put on 12% in the US on Tuesday as it reorganised debt.
Momentum on a red day
"In an otherwise red day for global equity markets, tanker stocks saw some momentum on increased talks of floating storage," Fearnley Securities analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart said.
With the second wave of coronavirus infections hitting some major economies, the contango in oil markets has widened this month.
Crude prices dropped between and 4% and 5% on Tuesday, with weak refining margins and uncertainty over demand, Fearnley said.
The falls were weighted towards prompt prices, boosting floating storage economics.
"While a potential new rush of storage is a possibility, there are factors making the present very different from what we saw a few months back, most importantly the fact that OPEC+ is now more in control of the situation and seemingly ready to take actions to stabilise prices further," the Fearnley analysts added.
Talk of storage contracts
With Saudi Arabia cutting October prices for crude liftings, floating storage deals for VLCCs are being talked at $25,000 per day for six months.
There are also suggestions of several charters of shorter four-to-six-months duration at between $25,000 and $40,000.
VLCC spot rates are $10,000 per day from the Middle East Gulf to Asia.
Traders are said to be particularly active in securing tonnage, Fearnley added.
TradeWinds reported on Tuesday that Trafigura has booked at least six more VLCCs in the period market as the trading giant continues its chartering spree amid the improved economics for floating storage.
What kind of curve?
Fearnley said the shape of the oil price curve is now key for tanker owners.
The market is seeing slower demand recovery than industry forecasts had suggested, meaning "more sluggish" stock draws, its analysts added.
This in turns means a delayed return of oil supply, a key driver of tanker demand.
In the case of a "new demand meltdown" should Covid-19 cases accelerate, Fearnley said there could be another round of refinery shutdowns and oil demand returning to the lows seen in the second quarter.
"Such a scenario would likely entail further production cuts and potential new floating storage as inventories remain elevated. This scenario would be supportive for tanker rates into 2021 but add further downside risk on the medium term," the investment bank added.
