China will need to increase its oil imports if tanker owners are to see their shares rise.
ABG Sundal Collier said oil in transit ticked up last week but still trails year-on-year figures as seaborne crude oil heading to China fell 600,000 barrels per day year-to-date, versus 100,000 barrels per day globally.
The Chinese figures were “underscoring where the problem lies” analyst Petter Haugen wrote in a note published on Tuesday.
“Last week VLCC rates declined again, and while it is still within the normal range for the season, we should see increasing oil-in-transit and also higher rates in the next few weeks if the tanker equities are to prosper. The status quo does not suffice,” he added.
Since the beginning of the month, VLCCs have made moderate gains, rising from $35,119 per day on 1 October to $36,106 per day on Tuesday, according to the Baltic Exchange.
But the modest rise comes in the aftermath of Iran’s missile barrage on Israel.
The attack prompted concerns Israel might retaliate with attacks on Iranian oil or nuclear facilities and set rates across the market higher.
VLCCs hit $42,357 per day on 7 October before posting declines every day since.
The end of the year tends to be a stronger period for tankers and owners are bullish this year, as well, with hopes that Chinese demand will rise and Opec+ will unwind production cuts.
But not everyone is as confident.
In late September, Kpler analyst Matt Wright said Chinese demand would not grow as much and that VLCCs would face competition from suezmaxes in the Atlantic basin, where rates are the highest on a time-charter equivalent basis.
Meanwhile, prominent publicly-listed tanker companies hover around the midpoint of their 52-week averages.
International Seaways closed Monday at $50.69, below its $54.01 average, while Frontline ended the New York trading day at $23.20, just under its $23.87 average.
Okeanis Eco Tankers’ New York-listed shares were above their $31.60 52-week average at $33.20. DHT Holdings’ shares closed at $11.34, above the $11.04 average.
