Time to discuss the ugly cousin of 2021.
The cheapest, most attractive risk/reward part of the freight world.
The best value that I see in the whole commodity spectrum(apols #uranium clan).
You might have already guessed it; it’s finally time to talk abt #tankers #OOTT 1/n
The cheapest, most attractive risk/reward part of the freight world.
The best value that I see in the whole commodity spectrum(apols #uranium clan).
You might have already guessed it; it’s finally time to talk abt #tankers #OOTT 1/n
had to keep on producing, floating storage was the only solution leading to a majestic surge in freight rates. As lockdowns eased, floating storage was no longer needed, thus supply came back online while demand was nowhere near 2019 levels. Naturally the mkt collapsed. 3/n
To date it has not recovered. 2021 has been an annus horribilis for the tanker market. Indicatively, $VLCC ytd returns are -$615/day (not a typo!). At the same time demand was getting normalized and $OPEC was steadily increasing production. 4/n 
Tanker stocks have performed better, partly because of more "diversified" fleets (product tankers had a marginally better year) but mainly because Wall St is fwd looking and doesnt really give a fck of how 💩spot or fwd rates are when they are completely unsustainable. 5/n
But why is this relevant now? the answer is simple:
Due to the meltdown of the FFA curve this past week.
And if one can argue that Black Friday was eventful enough, to lead to this collapse, the same cannot be said for the whole week. 6/n
Due to the meltdown of the FFA curve this past week.
And if one can argue that Black Friday was eventful enough, to lead to this collapse, the same cannot be said for the whole week. 6/n
Although one can disagree with Baltic's derived assessments of TCE rates, the rough numbers are there. Looking at the rear view, by historical standards, the futures curve is very suppressed. Even cal24 dropped c.10k/day in the past few days. Futures pricing is clearly wrong. 7/n
Historically VLCCs have averaged c.40k. Of course history doesn't mean much. So let me quote @ManihiB in what he recently perfectly summarized with regards to political upward risk the market can face. 8/n
If a deal is reached and sanctions are lifted, those old dirty VLCCs will no longer be able to compete in the market.
If deal is not reached, we could see stronger enforcement of sanctions. Remember COSCO 2019?
Either way, only upside compared to todays situation.
9/n
If deal is not reached, we could see stronger enforcement of sanctions. Remember COSCO 2019?
Either way, only upside compared to todays situation.
9/n
In the meantime, the orderbook remains v low for the same reasons already mentioned in my #drybulk thread a couple of weeks ago, and this wont change any time soon, and scrap prices remain elevated so at current shit rates increased scrapping activity can be expected. 10/n
What we are seeing, is a market completely dominated by hedge flows, all using a similar model where period ships need to be covered with FFAs. Lack of speculators means the selling pressures at times are not met with strong support and as a self fulfilling prophecy when the 11/n
market legs down, risk management takes over and hedgers rush to sell ahead of each other. Hence, current rates make no sense, and they provide option-like entry point, with a lot of time value to work in ones favour. Time might be needed, but the market will eventually improve.
This mkt has been in the doldrums since the aftermath of the monumental squeeze that took place in q2 2020. Quick reminder of what happened; in short, COVID lockdowns, caused a huge short-term demand destruction in products, on-shore tanks got full globally, and as refineries 2/n
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