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.
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