I think that article is a pretty accurate picture of the current situation. There are many more VLCCs and Suezmaxes than can be employed under the current economic conditions, and the result is a spot market rates that won't cover crew and fuel. There are still a good number of single hull tankers that will be effectively banned from trading this after this year, and there will likely be 20-some of the scheduled deliveries next year not take place, so the VLCC fleet is not likely to get to 700. It's still a lot more ships than there are cargoes. There should be some seasonal uptick in the next couple of months, but until economies really start growing again, it's going to be a hard market. Even JF has said that there's no money to be made in tankers for the next few years.
SFL is different because its fleet is mostly on long term charters with fixed minimum rates. As long as SFL's charterers stay in business, SFL should be able to maintain its dividend. That said, most of SFLs tankers are leased to FRO at ~$25k/day. If FRO can't charter those ships at any more than $8k/day, FRO will be in danger of failing. SFL has some diversity, notably in the SDRL charters, which now represent more income than the FRO charters, but I think that failure of FRO over then next couple years is the biggest risk to SFL.
Nor do I think that the current market is sustainable. At $5k or $8k/day, a lot of the VLCC fleet is worth more as scrap. It's a cyclical industry, and we're on our way into the bottom end of the cycle.
I actually suggested on this Message Board back in August that SFL holders consider hedging their risk a little by shorting Frontline. I did this, and it has worked OK so far: the FRO short is slightly "in the black", and SFL is actually up slightly since then. I think there may be more in this trade, especially the short on FRO. Tanker spot rates since July are lower than they were in 2009, yet Frontline 3q- and 4q-EPS estimates are still higher than their 2009 results. Investors have a great deal of confidence in old John Fredrickson, however, because he made them so much money in 2002-2007.
D_steven...So much to tell...here is my short answer...! SFL should do good regardless of tanker rates because they always get their lease payments...income is not really based on shipping rates....! SFL also leases out drilling rigs which has strong color at this time, plus SFL has some other type ships that they lease out and etc. (read company profile on yahoo)...! SFL, FRO, SDRL and some other companies have the strong footprint of John Fredrisken aka "The Tanker Guy", shotcaller/major shareholder...he is a proven winner in this type of business...! My opinion, SDRL and SFL should both shine in 2011...!