Tanker Stocks Looking Good

If you think the tankers are running up just because they are oversold and due for a bounce, it may be more than an oversold bounce.  Right now, traders are leasing huge tankers which hold about 2 million barrels of crude and they are storing crude oil to take advantage of future higher prices.  The December prices for crude are around $62.50, which is about $13.50 more than the next contract, which is the February 2009 contract.  It’s the way the futures market is pricing oil right now.  It’s $49 or so right now and the December contract is around $62.50.  So, you buy the oil now and store it and you have a contract to sell it in December, holding it for 9-12 months.  They have to pay for shipping costs, insurance, & financing costs.  But, if the numbers work out which apparently they do, then they store it.  The rates for storing oil are about $.90 per barrel/month.  Some companies in this group are Frontline (FRO), General Maritime Corp. (GMR), Overseas Shipholding Group, Inc. (OSG), Teekay Corp. (TK), & Nordic American Tanker Shipping Ltd. (NAT).  Anytime you have visibility meaning you can see the company’s sales out a few quarters, there is more certainty.  These stocks have gone up about 30% from the low in November.  They all look like they have more room to go on the upside.  As opposed to the dry shippers, which really need economic activity to pick up for them to continue their run, the tanker companies are already getting more business due to the futures market.  Keep watching these.


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January 2009
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