John Fredriksen’s Frontline is expected to follow up its VLCC resale and product newbuilding swoops with the purchase of additional tankers at a time IMO 2020 and political tensions are seeding the market.
Frontline announced last week it had bought a VLCC under construction at Hyundai Heavy Industries in a $92.5m move, alongside an order for two LR2s.
The purchases added to a strike for a suezmax resale earlier this year at a time when Fredriksen had been selling some privately-owned tankers.
Anders Karlsen, an analyst at Danske Bank, said the price of the latest VLCC looked attractive, particularly when compared with the $98m each Hunter received for two if its tankers.
“We would not be surprised to see additional acquisitions over coming quarters,” he said. “The acquisitions are set to add capacity in 2020 and 2021.”
Danske forecasts a profit of $69.9m for Frontline in 2019, rising to $267.8m in 2020 and $298.9m in 2021.
The orders and VLCC resale were announced just days after a Frontline vessel — the 110,000-dwt Front Altair (built 2016) — captured global headlines for its involvement in the Middle East tanker drama.
“The fire onboard the Front Altair following an attack on the vessel reflects a sensitive situation in the Middle East,” Karlsen said.
“Frontline is likely to be cautious in terms of entering the region but we note that spot rates have risen with the increased tensions.”
He added: “We continue to see US exports as a market catalyst in combination with effects of IMO 2020 preparations and refineries returning to operation after a period of high maintenance. We still see high deliveries as a near-term challenge but expect markets to improve in 2020.”
Hostilities in the Middle East continue to dominate the global news agenda.
Yesterday US president Donald Trump said countries should protect their own ships in Strait of Hormuz.
Within hours, he had slapped new sanctions on the nation and its leadership.
The US Department of the Treasury's Office of Foreign Assets Control (OFAC) placed the "hard-hitting" measures against leaders of Iran's Islamic Revolutionary Guards Corp (IRGC) being held responsible for the allegedly unprovoked attacks.
Trump's actions slowed a rally in the oil market as it initiated what Arctic Securities analysts called a breather.
"The market is taking a step back to evaluate the geopolitical situation ahead of this week and next week’s key meetings between G 20 and, next week, Opec-plus," said Arctic.
"Trump’s tweet, while having a hawkish heading came across more muted when he questioned the economic rationale of US forces to protect [Middle East Gulf] oil supplies."
