Outlook Dims for Frontline (FRO), Nordic American (NAT), Others as Crude Demand Struggles
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Frontline (NYSE: FRO) is ticking lower Tuesday morning, following lowered expectations issued earlier for the tanker segment.
According to Bloomberg-compiled data, rates for very large crude carriers (VLCCs) will drop 5.6 percent to $21,250 per day in 2012. That's lower than previously forecast, noted Bloomberg, and at the lowest annual rate since 1999.
Frontline said it needs an average rate at $24,100 to break even.
VLCC fleet growth is projected to be 6.9 percent in 2012, outpacing demand and adding to segment glut.
News comes just a few weeks following the International Energy Agency (IEA) reducing its overall crude demand forecast for 2012 and expecting even slower growth in 2013. Additionally, U.S. Department of Energy data show crude stockpiles nearing 22 year highs.
Earnings for VLCCs have fallen 73 percent to $8,191 since the start of 2012, with rates moving 29 percent in the last five of seven months. That's extraordinarily volatile for a ususaly predictable market.
Earlier, Nordic American Tankers (NYSE: NAT) CEO Herbjorn Hansson echoed the same sentiment. In his shareholder letter today, Hansson said, "In our sector, the orderbook for new Suezmax vessels is shrinking rapidly. By the end of next year, fleet growth will virtually come to a standstill." Hansson also noted, "Whilst no guarantees are given, seen in the context of potentially growing oil demand, this would suggest that a recovery in spot rates for our vessels could be on the horizon; the markets often turn quickly."
Frontline shares are down 0.4 percent ahead of the opening bell Monday. Traders will also be watching Nordic American, Knightsbridge Tankers (Nasdaq: VLCCF), Teekay Corp. (NYSE: TK), Teekay Tankers (NYSE: TNK), and others.
According to Bloomberg-compiled data, rates for very large crude carriers (VLCCs) will drop 5.6 percent to $21,250 per day in 2012. That's lower than previously forecast, noted Bloomberg, and at the lowest annual rate since 1999.
Frontline said it needs an average rate at $24,100 to break even.
VLCC fleet growth is projected to be 6.9 percent in 2012, outpacing demand and adding to segment glut.
News comes just a few weeks following the International Energy Agency (IEA) reducing its overall crude demand forecast for 2012 and expecting even slower growth in 2013. Additionally, U.S. Department of Energy data show crude stockpiles nearing 22 year highs.
Earnings for VLCCs have fallen 73 percent to $8,191 since the start of 2012, with rates moving 29 percent in the last five of seven months. That's extraordinarily volatile for a ususaly predictable market.
Earlier, Nordic American Tankers (NYSE: NAT) CEO Herbjorn Hansson echoed the same sentiment. In his shareholder letter today, Hansson said, "In our sector, the orderbook for new Suezmax vessels is shrinking rapidly. By the end of next year, fleet growth will virtually come to a standstill." Hansson also noted, "Whilst no guarantees are given, seen in the context of potentially growing oil demand, this would suggest that a recovery in spot rates for our vessels could be on the horizon; the markets often turn quickly."
Frontline shares are down 0.4 percent ahead of the opening bell Monday. Traders will also be watching Nordic American, Knightsbridge Tankers (Nasdaq: VLCCF), Teekay Corp. (NYSE: TK), Teekay Tankers (NYSE: TNK), and others.
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