Shipping: "Tankers Could Face Rocky Period Ahead"

This has been such a dynamic situation that, although we've tried, the blog as platform has shown some drawbacks. For example here are our three favorite equities in the space:

 (all via FinViz)

From those January "OMG you killed  Kenny Soleimani" highs—which had followed three months of steadily ratcheting Iranian aggression and aggravation culminating in the storming and burning of the U.S. embassy in Baghdad (the happy time* for tanker leasing), to the crash into March and then the return of the super-contango, this communication challenge would probably have been easier with a Vulcan mind-meld but as they say you fight with the army you've got.

Anyhoo, from Hellenic Shipping News, April 21:

It’s fair to say that the oil market is experiencing one of its most challenging periods, with a ripple effect expected in the tanker market as well. In its latest weekly report, shipbroker Gibson said that “a week after the biggest deal in oil history was agreed, the oil price has eased off and the contango spread in crude futures is wider than before the deal was signed. The markets seem underwhelmed.

However, this should not detract from the scale of the agreement. No matter what the baseline, removing 9.7 million b/d for May and June, followed up a deep 7.7 million b/d cut for the balance of the year and restrictions of 5.8 million b/d until April 2022, is unprecedented. To add to this, further cuts, be it State imposed or through economic declines from the US, Canada, Brazil and potentially Norway, could further reduce supply by 3-4 million b/d. Further action by key oil consumers to increase crude purchases for their strategic petroleum reserves (SPRs) will also have an effect. Nevertheless, given the current demand destruction, the fact remains thatthat theseworldwide cuts are simply not enough”.

Source: Gibson

“According to the IEA, global oil demand is estimated to have fallen by 29 million b/d in April, and 26 million b/d for May, reducing demand to levels not seen in 25 years. A huge stock build is inevitable over the coming quarter and despite more storage capacity being made available via SPRs, floating storage will be inevitable. This floating storage demand is likely to be the main pillar of support for the tanker market once OPEC+ cuts are felt by the market. At the time of writing, calculations show that the contango in ICE Brent supports 3 months storage at $138,000/day and 6 months at $89,000/day, before any profit margin for the trader is accounted for. VLCC spot rates currently stand at $165,000/day”, Gibson said....

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*A quick digression:
The Happy Time was the name Nazi U-boat crews gave to two separate periods of the war in the Atlantic: In the Western approaches after the Fall of France in May 1940 and then off the American Eastern Seaboard in the first half of 1942, after the U.S. entered the war. During this second happy time the Germans were sinking dozens of ships per month, peaking in May and June of '42 with 126 ships sunk in May and 135 sunk in June..
It is rather astounding to consider what the German Navy was doing.  Here's May.
Seven ships sunk on the 3rd and again on the 6th. Ten ships sunk on the 12th. Nine ships sunk on the 13th. and on and on.
The Happy Time