The Drewry Crude Tanker Equity Index has been largely on an uptrend since early July. The index jumped 10.6% in the past month (from 27 September to 26 October) and substantially outperformed the broader S&P 500, which was corrected by 3.2% over the same period. So far, 2023 has been very volatile for stocks of crude tanker shipping companies. The index rallied at the beginning of the year, followed by a declining trend between the latter half of March and June amid concerns about potential macroeconomic headwinds. However, the index has been on the rise for the past four months due to favourable market dynamics and a robust demand outlook for crude oil.

Overall, the index surged 37.3% YTD and outperformed the broader S&P 500, which moved up 7.8% YTD.

• The Drewry Product Tanker Equity Index is also largely on the rise since late June, and the index has gained 3.6% in the past month (from 27 September to 26 October) and outperformed the S&P 500 (-3.2%) during the period. Although the index has gained by a substantial 33.2% in the past four months on the back of double-digit growth in stock prices of all companies that constitute the index. The plunge between late April and June has curtailed the index’s gain to a modest 6.3% YTD, which is marginally lower than the 7.8% gain in the S&P 500 over the same period.

• Frontline is the best performer with an impressive surge of 77.5% YTD followed by mid-sized crude carrier owners like Teekay Tankers (57.7%) and Nordic American Tankers (49.3%). The stock of Tsakos Energy Navigation – a company with a diversified fleet and nearly 66% exposure to the time charter market – jumped 29.5%. DHT Holdings – a pure VLLC player gained 20.8% YTD, whereas a tussle between two key shareholders curtailed Euronav’s gain to 12.9% YTD.

Ardmore’s stock declined 5.2% YTD. The stock has recovered in recent months after seeing a 30.3% plunge in its stock prices between the latter half of April and June due to concerns of an economic slowdown amid the banking crisis.

The tanker shipping companies performed well in 2Q23 and the TCE revenue of the companies under our coverage jumped 96.4% YoY to USD 1,364.3mn from USD 694.6mn in 2Q22 as the companies realised higher TCE rates during the quarter amid a favourable market dynamics. Although the average spot rates in 3Q23 on major routes were lower than in 2Q23 due to seasonal weakness, we expect the companies to remain profitable in 3Q23.

Frontline and Compagnie Maritime Belge (CMB) – two major shareholders of Euronav entered into an agreement to end the current deadlock in Euronav under which CMB will acquire Frontline’s 26.12% stake in Euronav for USD 18.43 per share (~USD 972.1mn) followed by a mandatory public offering at the same price. Frontline will acquire 24 modern VLCCs from Euronav’s fleet for a total consideration of USD 2.35bn, provided the completion of the share purchase by CMB. Additionally, Euronav’s pending arbitration action against Frontline and its affiliates will be terminated.

Average spot TCE rates of tankers moved up 5.2% MoM in September, and we expect day rates for tankers to improve further in 4Q23, which would support asset prices of on the water vessels during 4Q23. The increased tension in the Middle East amid the war between Israel and Hamas is unlikely to affect tanker shipping markets as the conflict will be limited to a narrow zone. However, any escalation will lead to a rise in tonnage demand by major oil importers/traders amid fear of oil shortage.

Source: Drewry Maritime Financial Network