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Decoding the Fall in Crude Tanker Rates

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Series overview

The BDTI (Baltic Dirty Tanker Index) tracks shipping rates for the transportation of crude oil (DBO) on representative routes. The index has fallen to around 515 at the end of August 2016. At the beginning of the year, the index stood tall at around 1,065. So, what’s the story behind this fall? In the last eight years, the index has fallen as low as 450. Will this repeat or has the index bottomed out? We’ll discuss these questions in this series. We’ll also decode the story behind the fall in tanker rates and why VLCC (very large crude carrier) rates saw a smaller fall than Suezmax tankers. By analyzing the factors that are weakening the crude tanker fundamentals, we’ll discuss when the industry will take a different course.

 

[marketrealist-chart id=1581376]

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Stock performance

Since the index has fallen by 50% from the beginning of the year, crude tanker stock prices have also fallen. In 2015, crude tanker stocks had a bull ride. The situation reversed in 2016. Compared to stock prices at the beginning of the year, on August 29 almost all crude tanker stocks have ended in negative territory. Below are the stock returns on August 29 compared to their prices at the beginning of the year:

  • Nordic American Tankers (NAT) fell by 35%.
  • Teekay Tankers (TNK) fell by 62%.
  • Tsakos Energy Navigation (TNP) fell by 38%.
  • Navios Maritime Midstream Partners (NAP) had a 0% return.
  • General Maritime Partners (GNRT) fell by 47%.
  • Frontline (FRO) fell by 46%.
  • DHT Holdings (DHT) fell by 45%.
  • Euronav (EURN) fell by 36%.

Shipping companies account for 19.7% of the Guggenheim Shipping ETF (SEA). SEA fell by 10% in the same period. Investors who are interested in broader exposure to the industrials sector can invest in the SPDR Dow Jones Industrial Average ETF (DIA).

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