10 Images That Reveal How Healthy Oil Tankers Really Are

A new report by Morgan Stanley analyst Fotis Giannakoulis focuses on the market outlook for oil tankers. The report includes several images that tell the story of the current economic environment for the tanker business.

Here are 10 key images from the report

1. While global oil prices have collapsed due to massive oversupply conditions, OPEC has continued with its production growth, particularly in Saudi Arabia and Iraq.

2. Outside of OPEC, production levels have tapered off in recent months after reaching all-time highs about a year ago. The major source of year-over-year (Y/Y) non-OPEC production growth has been North America.

3. The core cause of the collapse in oil prices has been an imbalance of supply and demand, a scenario which has yet to be corrected.

4. According to cost curve analysis, North American shale oil and oil sands production are most at-risk from an extended period of depressed oil prices.

5. The U.S. accounts for by far the largest amount of global upstream oil capex and has also accounted for the largest reduction in global upstream capex so far in 2015.

6. To justify chartering vessels for floating storage based on current VLCC rates, the 12-month Brent spread would need to be about $11/bbl, which is more than double its current level.

7. There appears to be plenty of storage available for the record-level U.S. crude inventories created by the oversupply.

8. VLCC fleet growth is expected to be minimal in 2015, with a net projected expansion of only 9 vessels.

9. Despite a recent rally, many tanker stocks remain undervalued relative to historical valuation levels.

10. According to Morgan Stanley, if current rates persist, tanker stocks such as Tsakos Energy Navigation Ltd TNP, Teekay Tankers Ltd TNK, Frontline Ltd FRO and Ardmore Shipping Corp ASC “look undervalued.”