The most destructive oil crash in a generation is giving ship owners a billion-dollar windfall.
With the Organization of Petroleum Exporting Countries abandoning output limits in a drive for market share, ships that carry as much as two million barrels a trip are in demand to haul crude from the Middle East to Asia and North America. While oil prices fell about 35% in 2015, average earnings for these carriers jumped to $67,366 a day, the most since at least 2009, according to Clarkson Plc, the world’s largest shipbroker.
“The stars are aligned for us right now,” Nikolas Tsakos, the chief executive officer of Tsakos Energy Navigation Ltd., said in an interview at Bloomberg’s New York offices, adding that falling oil prices will likely stimulate demand and cargoes next year.
Tanker analysts are predicting the rate boom will persist for many of the same reasons oil forecasters are bearish. OPEC shows no sign of reversing its market strategy. At the same time, the US just repealed a four-decade old limit on its exports.
With on-land inventories already at record levels, this could mean more barrels will eventually be stored on ships, further increasing profit, said Tsakos.
Biggest Operators
The biggest tanker operators who manage fleets from Europe are Euronav NV, based in Antwerp, Belgium, DHT Holdings Inc., Frontline Management AS, which runs Norway-born billionaire John Fredriksen’s tanker fleet, and Tsakos Energy in Greece. All have seen their shares rise this year while most energy producers have fallen.
“We are benefiting from what is currently a challenging environment for the energy sector,” said Svein Moxnes Harfjeld, joint chief executive officer for DHT, in an e-mail. “We expect 2016 to be a rewarding year.”
Tsakos, whose company gained 4.3% in New York trading this year, said the increase should have been higher, given that “the underlying business is doing very well.’’ Too often, tankers are lumped in with other oil industry services in the minds of investors, he said.
“Investors look at tankers as an oil service, which we are,” Tsakos said. “But I think very few have identified that this side over here is the only oil service that’s positively affected by the dropping oil prices. I hope in the new year that this will be recognized, and our share prices are moving in the right direction.”
Earnings to Double
While rates are forecast to slip in 2016, the ships will still earn $46,400 a day, the second best year since 2009, according to the median of six analysts surveyed by Bloomberg and historical data from Clarkson.
The average carrier is about 332 meters long, or almost 1,089 feet, data from IHS show. The carriers’ earnings will more than double this year, according to analyst estimates compiled by Bloomberg. The extra rates would work out at more than $5 billion in additional revenues if applied across the entire fleet.
