Friday, November 11, 2011

Jim Cramer- Sage, Seer, Soothsayer: "Frontline Jumps Most Since 1998 as Demand to Charter Oil Tankers Builds" (FRO; TK; NAT)

A couple days ago I saw a MSNBC story, "In 31 years, I've never seen markets this crazy" and was going to pass over it, when I hear "I've never seen anything like it" I think "You aren't working with enough datapoints", when the first bullet point jumped out at me:
1. If Europe is so weak, then why does oil continue to climb? Sure, it is possible that China is grabbing all of the oil it can. At the same time, the world is awash with oil even without Libya. Iraq is pumping much more than a year ago and is taking up the slack for Libya. The United States is pumping a phenomenal amount of oil vs. a year ago. So is Brazil.

I know that there is some manipulation going on, as there always seems to be, but you can't get this kind of performance unless the world (particularly Europe, where Brent trades) isn't just stabilizing, but actually accelerating (as nutty as that is).

What might be happening, and the more likely case, is that financial firms are betting that China is going to stop tightening and that Europe isn't going into recession so they are buying up ships of oil -- because the day rates are so, so low -- and storing them.
It is possible, we know from Herbjorn Hansson, the CEO of the largest oil shipper at Nordic American Tanker, that oil is being stored worldwide in his giant fleet for later delivery. In other words, it's for speculation. Either way, there is a tremendous opportunity in all of the oil service stocks as they were priced for a breakdown of oil and we have been getting the opposite. ...
I remembered an August post, "Wilbur Ross Ross Sees End to Slump in Shipping (FRO; TNK; NAT)" and thought "saaay..." but the markets were rockin', the DJIA was on its way to a 389 point loss and reality intruded.

Here's Bloomberg:
Frontline Ltd., the top global operator of supertankers, headed for its biggest weekly gain since December 1998 on signs of stronger demand to charter the largest crude-oil carriers.

Frontline has jumped 34 percent this week in Oslo trading. The stock was up 10 percent at 35.40 kroner by 12:43 p.m. local time, raising the Hamilton, Bermuda-based company’s market value to 2.76 billion kroner ($486 million). The shares are still down 76 percent this year.

Bookings of very large crude carriers to load oil in the Persian Gulf climbed to 137 for this month, according to commodities and freight-derivatives broker Marex Spectron Group. That exceeds the previous high of 129 in April, it said. Charter rates on the industry’s benchmark trade route starting in the gulf are up the most since February this week.

“Chinese refineries are increasing production to avoid the diesel shortage of last year,” Erik Nikolai Stavseth, an analyst at Oslo-based Arctic Securities ASA, said by phone today. “U.S. crude stocks are running down, so there is support for building inventories, and there are slightly more ships booked to head west of the Persian Gulf.”...MORE 
In early premarket action Frontline is trading up 5.21% at $6.26, Nordic-American Tanker is unchanged at $14.07 and Teekay hasn't traded after closing at $26.54 yesterday.