With the OPEC + pumping more, tankers should have done better but day rates are stuck below $10,000 a day. This may be the consequence of the phantom trade between Iran and China. Chinese Tea Pots refineries are illegally buying oil from Iran at $40 a barrel and pirat tankers, mostly old vessels which should be scrapped, are charging up to $60,000 a day to transport oil to China through Malaysia. Consequently, a lot of tonnage which should have been scrapped is still on water. We are talking of 2 million barrels daily out of the 12 imported by China.
The end of the US embargo would indeed be excellent news for the market. Firstly, these old tankers (up to 50 ?) will be scrapped and as shipyards are at capacity, no new tankers ordered today could be delivered before 2024 . The Supply /demand equation would then be a relief for the tanker market. Iran is already at capacity and no new oil on water from Iran can be feared. The market is not fully aware of this. With the inventories now below the 5 Y average, oil demand has to come from new oil, not from the inventories. A positive for tankers obviously. With the Iran situation normalising and no lock downs from a 4th Covid 19 wave, we could see a very fast recovery of the tanker rates, probably above $40,000 daily vs $ 9000 today …. With tanker stocks trading below 80% of book value, we could see these companies trading at 3 to 4 times next year’s earnings… A boon for value funds which we hear have multiplied their calls to tankers’ IR recently. . The JODI data is improving with exports from the USA and Saudi Arabia building up… Yet, we are in August, normally a seasonal low.
Our funds are taking the bet and we have built a 25% position in the best tanker names and product tankers… Fingers crossed.
