Spot tanker rates: Suezmax vessels and Teekay Tankers’ outlook

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Sep. 8 2014, Updated 4:00 p.m. ET

Spot tanker rates

In July 2014, tanker rates in the Suezmax and Aframax segments reached their highest levels for July since 2008. You can mainly attribute this trend to an increase in long-haul Suezmax movements from the Atlantic to the Pacific, the end of seasonal refinery maintenance, stockpiling due to geographic unrest around the world, and vessel delays at U.S. gulf and Mediterranean sea ports.

Spot tanker rates in the second quarter of 2014 averaged significantly higher compared to the same period last year. Suezmax rates improved by $4,000 per day or 33% year-over-year.

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This increase in spot rates reflects higher fleet utilization compared to this time last year and is a strong indication of tightening tanker market fundamentals. It also benefits Frontline Ltd. (FRO), Nordic American Tanker Ltd (NAT), DHT Holdings Inc. (DHT), and Navios Maritime Acquisition Corporation (NNA). The Guggenheim Shipping ETF (SEA) tracks these shipping companies.

Outlook

Compared to average realized rates for the second quarter of 2014, Suezmax, Aframax, and LR2 rates for the third quarter of 2014 to date have been significantly higher.

Teekay Tankers (TNK) believes the recent increase in rate volatility is a positive signal of the stronger winter market, which typically begins in the fourth quarter. This market volatility is foreseen in the coming weeks and months.

Based on approximately 43% of spot revenue days booked, TNK’S third-quarter-to-date Suezmax bookings have averaged approximately $19,600 per day, up significantly from $16,100 per day in the second quarter of 2014.

Based on approximately 68% of spot revenue days booked, TNK’s third-quarter-to-date LR2 bookings have also seen higher averaging approximately $14,000 per day compared to $13,350 per day in the second quarter of 2014.

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