Image: Drewry
The Drewry Crude Tanker Equity Index has charted an impressive course, showcasing a robust uptrend since early July. Despite a recent dip of 7.4% in the past month, attributed to demand concerns in China and a sluggish global manufacturing sector, the index boasts a noteworthy 28.6% year-to-date gain. Notably, this outshines the broader S&P 500, which recorded a 19.4% YTD increase over the same period.
Scorpio Tankers recorded a marginal decline of 0.6% YTD although the stock is largely on the rise since
mid-July but the decline between February and the first half of July offset these gains. Ardmore’s stock
price decline of 5.2% over the same period as the increase in stock price over the past four and half
months was not enough to outweigh the decline in 1H23 due to concerns of an economic slowdown.
Similarly, the Drewry Product Tanker Equity Index has exhibited a consistent rise since late July, culminating in a modest 1.1% year-to-date growth. Challenges in 2Q23, stemming from economic headwinds, led to a 19.0% plunge. A recent 5.0% decline from November 7 to December 7 further offset gains made between July and October 2023. This index, too, lags behind the S&P 500’s performance.
The recent OPEC+ announcement of a 2.2 million barrels per day production cut from January 2024 introduces potential pressure on vessel earnings and asset prices in the coming year. However, optimism prevails due to rising US oil production and favorable market dynamics, mitigating the risk of a significant downturn in the oil tanker sector.
In the realm of individual stock performances, Teekay Tanker emerges as the front runner, boasting a remarkable 58.9% year-to-date surge. Frontline follows closely with a robust 58.8%, and Nordic American Tankers notches an admirable 28.1%. Tsakos Energy Navigation, with a diversified fleet and significant exposure to the time charter market, exhibits an 18.5% jump. Euronav and DHT Holdings also secure positive gains at 12.8% and 10.2% respectively.
Conversely, Scorpio Tankers records a marginal decline of 0.6% year-to-date, despite a consistent upward trajectory since mid-July. Ardmore faces a 5.2% decline over the same period, with recent gains insufficient to counterbalance earlier losses due to economic slowdown concerns.
Turning attention to revenue, the TCE revenue of crude tanker companies experiences an 18.1% year-on-year surge to USD 946.8 million in 3Q23, attributed to higher TCE rates amid favorable market dynamics. In contrast, product tanker companies, while remaining profitable in 3Q23, witness substantial declines in topline and profitability. Average TCE rates in 3Q23 dip nearly 35% from the record high in 3Q22, influenced by factors such as a shift in fuel preferences, changes in trade patterns, and increased stocking activity by European economies ahead of winter.
Spot TCE rates for crude tankers, on average, surge 22.2% month-on-month in November, with further improvements anticipated in December. Meanwhile, product tanker rates experience a mixed scenario, rising on the North West Europe-West Africa route but declining on the Middle East-UK Continent and Middle East-Japan routes. November sees an 8.3% average increase in product tanker earnings, expected to rise further due to increased buying amid the winter in the northern hemisphere.
Despite corrections in July and August, asset prices in the oil tanker sector are on an upward trajectory, with second-hand asset prices witnessing a 15.6% year-to-date increase. As of November, both newbuilding and second-hand price indices for crude and product tankers reach the highest level since January 2015.
Source: Drewry