Frontline (FRO) - Can anyone make a bearish case?

ogarbitrage · Jan 12, 2015

TradeWinds said:
Interest in floating storage contracts has helped lift VLCC time charter activity to an 18 month high, according to data from Charles R Weber.

The shipbroker counts deals for eight big tankers, including a ULCC, concluded or on subjects from the start of 2015 up until 9 January.

Weber says the figure, which includes two tankers specifically for storage, is already the highest monthly figure since the third quarter of 2013.

It believes open interest has been expressed on a further nine tankers, suggesting further time charters will be concluded in the coming weeks.

In its weekly report, Weber said the widening of contango in Brent futures has raised the prospects for VLCCs markedly.

However, the brokerage says the economics of storage remain challenging.

The strong freight market is one obstacle, it explained. A triangulated VLCC voyage is currently worth $82,931 per day over 115 days, meaning owners are reluctant to part with their ships for storage deals without a premium fee, Weber says.

“We are presently assessing one to three month VLCC period rate at $70,000 daily with the six month rate at $55,000 daily, basis delivery Singapore or the Middle East,” Weber said.

“Basis these assessments and including all operational, insurance and capital costs, the economics to support floating storage appear to be absent from storage contracts less than three months.

“For greater than three months, opportunities rise in line with the declining daily cost of the time charter,” it added.

As TradeWinds reported this morning, Vitol has hired the laid-up 441,000-dwt TI Oceania (built 2003) for an 11 month period at a rate of around $40,000 per day.

Last week Navios Maritime Acquisition fixed out the 300,000-dwt Nave Synergy (built 2010) for a year at $34,125 daily net.

Chief executive Angeliki Frangou said: “We chartered out one VLCC for a one-year period at a rate we believe may be the highest VLCC rate since 2010.”
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To compliment the above:

VLCCs used for storing crude could soon make their reappearance

ogarbitrage · Jan 13, 2015

Current vessel prices rising

5- and 10-year VLCC and Suezmax weekly prices on the run-up

FCXoptions · Jan 13, 2015

I closed out my stock position and used some of my profit to pay for May calls instead. Regardless of what happens with the options, locked in about a 10% gain in two weeks after the cost of the options, so I am pleased with that.

ogarbitrage · Jan 13, 2015

I am adding more stock and calls. Bought some Jans expecting a retrace tomorrow.

FCXoptions · Jan 13, 2015

Yeah, after I sold, I about smacked myself. I have been looking for it to pullback some since last week, then as soon as it does instead of buying more I sold. That is why I turned around and bought calls. I bought the May $4

ogarbitrage · Jan 13, 2015

Good choice. I am concentrated in the May as well because the Feb options expire before their earnings call.

ogarbitrage · Jan 14, 2015

Traders take supertankers for likely crude storage of up to 45 mil barrels

3.5% of the global VLCC fleet now off the market.

ogarbitrage · Jan 14, 2015

From Fearnleys Weekly:

Fearnleys said:
A very active week as such for the Vlcc’s and in the [Middle East Gulf] particularly as a steady flow of January cargoes have brought the count up to about 130 and basically finished. Rates have stabilized and levels yielding abt $75k/day for meg/east voyages. In the interim, focus is in West Africa as Meg stem confirmations are not due until over the week end. Rates here remain firm and mirrors the earnings in the meg. The main topic is however the widespread interest for Vlcc’s on storage to ‘play the contango-game’ with some 20 ships recently tied up. As we predicted last week activity for Suezmaxes did improve, particularly from West Africa. Rates stabilized at levels yielding in the low usd 50,000 pdpr on a round trip voyage West Africa to Western destinations. In order to maintain present levels we need to see February laycan stems come into play very soon. In Med/Bsea, rates also stayed at firm levels, not only due to delays in Turkish Strait, but also delays in Weather ports in the Med and several ports in Bsea closed due to weather. Aframax owners trading in the ice ex Baltic enjoy daily earnings close to 90k per day at current rate levels. There is a two tier market in the north as owners with non-ice ships is getting paid about ws50 points less than the vessels with ice class. We expect this market to stay firm going forward as the bad weather in the Atlantic and North Sea seem to continue for the next few days as well. Aframax rates in the Mediterranean and Black Sea has also increased due to weather delays in the area. Charterers looking to secure tonnage with safe itinerary is facing an uphill battle with owners pushing for a premium on rates. We expect this market to stay firm going into February.
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ogarbitrage · Jan 14, 2015

Pareto raises VLCC view

TradeWinds said:
Pareto Securities has boosted its VLCC spot rate forecasts as a spike in floating storage contracts combines with a supply-driven recovery.

Analysts at the finance house believe the improving tanker market will also host further merger and acquisition activity, with 2015 branded the “year of consolidation”.

The team led by Eirik Haavaldsen raised its rate projections amid suggestions between 20 and 30 VLCCs could be locked into storage deals as traders look to exploit contango in the oil price.

In an update on the tanker market, Pareto said floating storage was changing 2015 from being promising to very good.

“While we three months ago would have urged investors to considering taking profits at current share price levels, we now believe the strong rate environment will last longer than last year, and thus see further upside across the board,” Haavaldsen and colleagues Nicolai Hansteen and Oystein Dalby said.

For 2015, Pareto Securities now projects VLCC spot rates of $45,000 daily, up from the $35,000 per day previously charted. This includes an expectation that 20 VLCCs will be taken out of the market on storage deals.

For 2016, its expectations are for spot rates of $40,000 daily as storage vessels return and newbuilding deliveries pick up.

Haavaldsen, Hansteen and Dalby say the belief that 2015 will be better than 2016 is something few would have anticipated a couple of months back.

“This will be beneficial to the companies with vessels in the water, and we expect both resale and second hand values to increase this year – with values of 5Y old VLCCs and suezmaxes expected up 10% and 15% respectively,” the trio said.

The update, in which Pareto kept its buy rating on crude tankers, said 2015 is expected to be the year of consolidation. This follows the year of hope in 2013 and the year of recovery in 2014.

“We expect further merger and acquisitions this year, as investors’ taste for size will be difficult to ignore,” the analysts said.

Genmar’s pending purchase of Navig8’s 14 newbuildings, a potential combination of Teekay Tankers and TIL, further growth at Euronav and a belief that John Fredriksen “will gather his tanker-troops this year”, were all noted.

“Among other non-listed names we could see both industrial groups with size, experience and history such as Quantum aim for the public markets,” Pareto said.

“Private equity backed shipowners such as Ridgebury, Principal Maritime or Diamond S make their moves, either alone or in joint efforts in order to gain size.”
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ogarbitrage · Jan 15, 2015

Singapore cracking margins peak to two-year highs on firm HSFO, naphtha

Falling crude and tanker demand for bunkers (HSFO) has lifted fuel oil cracks globally the last few weeks.

Bunker cracks are strong in Singapore, Rotterdam, and USGC: