Oil tankers deliver stellar returns
While upstream oil exploration and production companies have taken a hit due to the sharp decline in crude oil prices, refiners and other downstream players have benefited from increasing inventories.
Among shipping operators, pure play dry bulk carriers on average have delivered negative returns, as they were affected predominantly by a sluggish first half. In contrast, oil tankers have outperformed shipping peers, generating in excess of 50% year-to-date on a total return, or price return plus cash returns, basis.
Performance of dry bulkers versus oil tankers
Despite a slowdown, crude oil tankers in aggregate outperformed shipping operators. This trend was driven by the fact that crude oil is currently in contango, a situation where the forward price of a commodity trades at a higher price than its spot counterpart.
Companies such as Nordic American Tankers (NAT), Teekay Tankers (TNK), Navios Maritime Midstream Partners (NAP), Scorpio Tankers (STNG), and other crude tankers have delivered on average close to 27% returns this year. They have outperformed dry bulk carriers such as Star Bulk Carriers (SBLK), which alone has lost 61.1% in value year-to-date.
The Guggenheim Shipping ETF (SEA), which includes both tankers and dry bulkers, has lost 4.48% in value year-to-date compared to its benchmarks the SPDR S&P 500 ETF (SPY) and the iShares Transportation Average ETF (IYT), which have returned 3.11% and -7.91%, respectively, over the same period. The year has been a rough one for the transportation sector due to a sluggish first half.
In the next part of this series, we’ll take a look at how a crude contango plays a part in driving the performance of vessels that carry or store the commodity.