It's a new week -- and another week of disruption in the oil market. Oil prices are tumbling in Monday trading, with WTI crude prices down 28.3% by noon at $12.15 a barrel (for June delivery) and Brent down 9.5% at $19.58.
The stock prices of oil tanker transport companies, on the other hand, are surging:
- Teekay Tankers (NYSE:TNK) -- up 10.8%
- Teekay Corporation (NYSE:TK) up 11%.
- Tsakos Energy Navigation (NYSE:TNP) rising 13.7%
- And Nordic American Tankers (NYSE:NAT) shooting up a big 21%.
A survey of headlines makes clear what's going on with oil shipping stocks right now -- and it has little to do with actual shipping of oil.
Right now, the Singapore Strait is currently jammed with oil tankers -- five dozen of the beasts -- none moving, all floating at anchor and stuffed to their gills with oil. "Some" of these tankers, reports Bloomberg, "are being used to hoard fuel at sea" while waiting for oil prices to improve. "Others" are "parked" in hopes they can find a buyer -- any buyer -- willing to take their oil at a reasonable price today.
Traditional onshore oil storage sites are full to the brim with oil, forcing oil traders to find unconventional locations to hold their oil while seeking someone to buy it. On Friday, OilPrice.com reported that Energy Transfer is petitioning the Texas Railroad Commission for permission to stop using two of its pipelines for oil delivery, and convert them into temporary storage -- extremely elongated oil tanks -- for 2 million barrels of crude instead.
And of course, oil tankers make for another great place to store oil. Speaking to CNBC on Friday, Nordic American Tankers CEO Herbjorn Hansson confided that his company is making "tons of money" as oil traders bid up the charter price on his tankers in order to use them for oil storage.
And this should be great news for investors in Nordic American -- and in Teekay Corporation, Teekay Tankers, and Tsakos Energy as well. Why? Consider the example offered by Nordic American.
This company -- unprofitable over the last 12 months -- is heading into a global recession with $400 million in debt and only $50 million in cash to service it (at last report). That may sound problematic, but with cash pouring in from oil traders seeking ships in which to store their product, Hansson says his company's balance sheet is improving to the point where, pretty soon, Nordic American could be entirely debt-free.
When you consider that Teekay Corporation and Tsakos are also both unprofitable and carrying heavy debt loads ($4.6 billion net of cash, and $1.4 billion, respectively), the parallels are obvious. And Teekay Tankers carries more than $900 million in net debt, too, but was already returning to profitability last quarter (according to data from S&P Global Market Intelligence).
With the oil market winds now blowing firmly in its favor, Teekay Tankers stock could perhaps perform best of all.