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Crude Tanker Orderbook Increases on High Demand

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Apr. 9 2015, Updated 11:05 p.m. ET

Why is the orderbook significant?

In order to assess the crude industry’s future fundamental outlook, managers use the oil tanker orderbook as an important yardstick. It consists of the number of ships that have been ordered and the number of ships under construction.

Managers and investors are careful when they place orders since buying a new tanker is a huge investment. The cost can reach $100 million and above. Delivery dates are usually two or three-plus years out.

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Orderbook on the rise

In February 2015, the crude tanker orderbook increased to 74.3 million DWT (deadweight tonnage) from 73.8 million DWT in January 2015. This was primarily driven by the rise in VLCC (very large crude carriers) and Suezmax vessels.

In terms of number, vessels ordered decreased to 789 in February from 1,048 the previous month. A decreasing orderbook may suggest that oil tanker companies are cautious about the supply and demand of vessels in the market.

In the week of March 18, 2015, the tanker market saw a number of orders. Market sentiment indicates that shipowners are seeking to leverage on shipbuilder discounts. However, they’re also looking to book a spot in the tanker market’s upward cycle. This is evident from the recent ordering glut in the crude oil carrier segments.

Going forward

Since secondhand ships aren’t competitive and there are few candidates available for purchase, shipowners may continue to add new orders. This will benefit the performance of the PowerShares DB Oil Fund ETF (DBO) and tanker stocks such as Teekay Tankers Ltd. (TNK), DHT Holdings Inc. (DHT), Nordic American Tanker Ltd. (NAT), and Frontline Ltd. (FRO).

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