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Must-know: Crude oil indicators showing high positivity

Part 6
Must-know: Crude oil indicators showing high positivity (Part 6 of 6)

Must-know: Stable ship prices supporting crude tankers industry

Ship prices

Ship prices are an indicator that investors use to gauge crude tankers’ fundamental prospects. Ship prices can be broken into newbuilds and second-hand vessels. Newbuilds reflect an expectation of future rates, since it can take up to three or four years to construct a tanker. Second-hand vessels show nearer-term fundamentals.

Crude Tankers OrderbookEnlarge Graph

Newbuild prices

RS Platou, an international ship and offshore brokers and investment bank, stated that newbuild prices for crude tankers for June, 2014, have been consistent with the May, 2014, prices. This trend suggests that the shipping industry is still holding up its levels for crude tankers. Suezmax and Aframax have been consistent at $65 and $54 million, respectively. This is similar to the previous month levels. VLCC prices decreased marginally to $98 million in June, 2014, from $99 million in May, 2014.

CrudeTankers Vessel PricesEnlarge Graph

For bulk carriers, Kamsarmax and Ultramax prices in June, 2014, have been consistent at $30 and $28 million, respectively. Meanwhile, capsize vessel prices have dipped marginally to $54 million from $55 million in the previous month.

Current levels are either consistent or have recorded an increase in its dry bulk and tanker rates.

Outlook for second hand tanker vessels

The long-term outlook across the shipping industry is positive. It’s coupled with the forecasted short-term effects imposed by the supply risk for MEG crude. As a result, the risk is on the upside both for rates and asset prices which may prompt increased buying interest again.

Impact on crude tankers

Prices for five and ten year old crude tankers remained consistent or slightly lower in June. Ship buyers and sellers sentiment turned sour due to sharp increases in 2013 and early 2014, led by rally in  Baltic Dirty Tanker Index. Also, if we combine the 2013 and 2014 data on newbuild prices, we could say the outlook for crude tankers is stable and increasing. There were sharp increases in 2013 and early 2014, as the Baltic Dirty Tanker Index rallied.

If prices continue to rise over the next few months or quarters, the Guggenheim Shipping ETF (SEA) and crude tanker owners such as Frontline Ltd. (FRO), Tsakos Energy Navigation Ltd. (TNP), Nordic American Tanker Ltd. (NAT), and Teekay Tankers Ltd. (TNK) should benefit from the higher prices.

 

 

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