Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Oil Shippers' Profits Set to Rise

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Multiple global situations are affecting oil shippers; prices for their services are expected to rise because of them. The disaster in Japan has shut down roughly 20% of Japan's petrochemical capacity, leading oil traders to divert oil to the U.S., making boats which operate the route in high demand. This increased demand has led to an expected 24% rise in prices, which will go straight to the bottom line of oil shippers that operate on the U.S. to Europe route.

Japanese petrochemical plants are large buyers of naphtha, the lightest and most volatile fraction of petroleum. Naphtha can be converted into oil or made into ethylene, a key material for plastics. Demand has fallen sharply as production has halted at many major electronics manufacturers in Japan. Analysts polled by Bloomberg expect European naphtha shipments to Asia will slump by roughly 80% this month as manufacturing restarts and plants work off excess supply.

To deal with the excess naphtha, European refiners are blending it into gasoline and shipping it to the U.S. This will be a boon for shipping companies with medium-range tankers such as Teekay (NYSE: TK  ) . This should also lead to increased profits for K-SEA Transportation (NYSE: KSP  ) , which is in the process of being acquired by Kirby (NYSE: KEX  ) . The company transports petroleum products between ports along the eastern seaboard of the U.S., for refineries, storage terminals, and power plants.

Long-range companies with very large crude carriers (VLCCs) and Suezmax tankers should not be as affected by the Japanese shutdown. However, their rates are expected to rise due to the situation in Libya. European refiners received 85% of Libya's crude exports. Now that oil production in the country has slowed to a drip, European refiners are sourcing more oil from western African nations, forcing U.S. refiners to look to the Persian Gulf for more crude. This should boost utilization of tankers as well as prices for ships run by Frontline (NYSE: FRO  ) , Nordic American Tanker Shipping (NYSE: NAT  ) , and Teekay Tankers (NYSE: TNK  ) . The increase in prices across the board could help all these firms beat investor expectations when they report earnings.

With so much going on, it's important to keep up with all the news affecting shippers. We can help you keep tabs on your companies with, our free, personalized stock-tracking service. Not only will you get valuable updates on companies you are interested in, but you also get immediate access to a new special report, "6 Stocks to Watch From David and Tom Gardner." Click here to get started.

Dan Dzombak can be found on his Twitter account: @DanDzombak. He does not own shares of any of the companies mentioned in this article.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1464247, ~/Articles/ArticleHandler.aspx, 10/22/2016 9:39:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:03 PM
FRO $7.71 Down -0.15 -1.91%
Frontline CAPS Rating: **
KEX $60.16 Down -0.28 -0.46%
Kirby CAPS Rating: **
KSP.DL $0.00 Down +0.00 +0.00%
K-Sea Transportati… CAPS Rating: *****
NAT $9.75 Down -0.02 -0.20%
Nordic American Ta… CAPS Rating: ***
TK $8.04 Down -0.12 -1.47%
Teekay CAPS Rating: ***
TNK $2.52 Down -0.08 -3.08%
Teekay Tankers CAPS Rating: ***