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Tanker stocks weekly analysis introduction

Xun Yao Chen, Industrials Analyst

Tanker stocks weekly analysis August 5–9 (Part 1 of 10)

Introduction: Recap

During the first half of the week from August 5 to 9, concerns over China’s poor industrial activity as well as the Fed’s announcement that tapering will begin soon kept oil prices and the share prices of tanker companies weak. But positive industrial output growth and retail data in China for the month of July supported tanker stocks by the end of the week. As a result, tanker stocks ended the week mostly unchanged from the prior week.

Tanker Stock Performance 2013-08-13

Weekly key indicators

While tanker stocks have performed well since July on the back of higher tanker rates—driven by higher oil prices, lower supply growth, and brightened worldwide economic outlook—questions remain over whether the recent climb will continue over the next few years. At the end of last week, we saw some interesting developments within the tanker industry. Nordic American Tankers Ltd. (NAT), which reported its earnings on August 12, was quite optimistic about the third quarter prospects of the tanker industry. Yet Jefferies downgraded the company to underperform from a hold on Tuesday, August 13, claiming that the premium is unsustainable “once the surge in Suezmax spot charter rates inevitably subsides.” So who might be right?

In addition to the key indicators we follow on a regular basis that are showing interesting developments, we’ll also explore seasonality, the EIA’s (Energy Information Administration’s) future world oil production outlook, and China’s oil imports.

Continue to Part 2: Ship orders fall and activity remains weak

Browse this series on Market Realist