In this article, we shared our list of the 11 best oil tanker stocks to buy now. You can skip our analysis of the oil tanker industry and its demand growth and go to 5 Best Oil Tanker Stocks To Buy Now.
The boom of the oil tanker industry is undeniable, as the world has been heavily dependent on the steady flow of oil transfer from one point to another. The Covid-19 pandemic resulted in upsetting effects on the supply chain of oil which experienced an unprecedented decline in demand. According to the International Energy Agency (EIA), the average barrels of oil consumed per day decreased to an upsetting 30 million during the pandemic as compared to the usual consumption of 65-70 million barrels per day. The decline in demand forced the reduction of oil production because of the unavailability of land-based storage areas for oil. However, oil producers were partially able to keep producing above the demand as they were able to use oil tankers as an alternative for oil storage. So, the oil tanker industry actually benefitted from the pandemic despite the huge collapse in demand. In a separate article, Business Standard noted that an increase in sea storage sparked 6-8 times higher charges where vessels may charge up to $200,000 per day from $25,000 per day before the pandemic.
Despite the global efforts to reduce climate change and rely solely on renewable sources, the demand for oil continues to increase in relation to oil drilling and transport. In a report by Statista, from 1980 to 2020, the global oil tanker fleet deadweight tonnage (DWT) increased around 77% throughout the 40 years. As of 2020, the number has already stood at 601 million deadweight tonnage.
The collapse of oil demand in 2020 is a temporary phenomenon. Economists expect oil demand to come back in 2021 and we can already see this in oil prices as US benchmark crude futures surpassed $66 on Friday.
Oil and Gas Forecast
The oil and gas industry is highly volatile as both supply side shocks and demand side shocks affect the industry at any time. Amongst most of the industries that recovered from the COVID-19 pandemic, the oil and gas industry was left with the most uncertain rebound. According to an article published by Deloitte, investors were not as bullish on the industry during the pandemic, as S&P 500 index oil prices and energy stocks underperformed since July 2020. In the same article it was shared that the US oil and gas companies had to furlough around 14% of their employees because of the lower demand in the sector. The 2021 demand for oil will recover, however, the number is still expected to be around 5-7% lower than pre-pandemic levels.
Growth of the Oil and Gas Industry
The Dallas branch of the Federal Reserve surveyed oil producers during the fourth quarter and found that most of the companies will limit their capital expenditures in 2021. Some companies’ hesitations were brought about by the increase in electric vehicle (EV) demand and governments’ efforts to achieve net zero-emissions by 2050. It is true that the long-term trajectory of oil consumption isn’t encouraging for oil investors, however, we are still a long way away from that. McKinsey estimates that the global demand for oil will exceed 100 million barrels per day by the end of 2021 and gradually increase to 102-10 million level by 2025. According to McKinsey the oil industry spent $309 billion on development and maintenance capital expenditures in 2019 and projects a 34% decline in 2021 to $194 billion. McKinsey also estimates that capital expenditures will only increase to $234 billion in 2022. We believe oil producers are going to be slow in investing and this will continue to push the oil prices higher in 2021, but oil industry is a very competitive industry and higher oil prices will lead to higher capital expenditures and more production by oil companies in 2022.
In order to identify the 11 best oil tanker stocks to buy now, we created a list of oil tanker stocks by searching Google as well as using articles like 12 Largest Oil Tanker Companies in the World published by Insider Monkey. We were able to narrow down our list to the 11 best oil tanker stocks using the hedge fund sentiment data.
We rely on hedge fund sentiment indicators because we have been able to use them to identify promising investment ideas in our premium newsletters. The portfolio of stocks that are shared in Insider Monkey’s…
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