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Some tanker actions, including Scorpio Tankers (New York Stock Exchange:STNG) and Ardmore Shipping (NYSE:ASC) quadrupled last year, and as new sanctions have shifted the flow of Russian oil to more distant ports, Evercore analyst Jonathan Chappell think the rally”It may have only just begun.”
Chappell sees the Russian invasion of Ukraine as “a generational geopolitical event likely to change the maritime flows of the world’s (still) most important commodity for years to come”, and believes that the effects “have not fully played out after only 6- 9 months”.
The ban on Russian fuel shipments to Europe that went into effect two weeks ago may be an even bigger catalyst than the ban on Russian crude, Chappell said at the conference this weekend. Barron’s.
China and India don’t import as much fuel as diesel compared to crude, because they have their own refineries to produce fuel, so Russia will need to ship fuels on even longer and more expensive journeys to find new markets, Chappell explained; In the first week of the fuel ban, rates for large tankers rose 35% after hitting 14-year highs last year.
A “shadow fleet” of Russian tankers that can carry oil without adhering to price caps consists largely of very old ships that don’t really compete with the newer ships used by most companies, Chappell noted.
So far, oil-focused tanker companies have outperformed oil-focused companies; Scorpio and Ardmore shares are up 280% and 390%, respectively, in the past year, and Teekay Tankers (TNK), known for its medium tankers, is up 245%.
Crude tanker inventories also post big gains, but not nearly as big; DHT Holdings (DHT) has doubled and Euronav (EURN) has gained 60% in the last year.
Chappell believes that both types of tanker companies have room to operate higher, with crude carriers potentially starting to catch up with fuel carriers as time goes on.
Scorpio Tankers (STNG) recently reported better-than-expected fourth-quarter adjusted earnings and revenue.
