What happened

Like a globe-spanning seesaw, oil prices went up today, and oil tanker stocks went down. The moves are basically the opposite of what we saw on Monday. As of 11:20 a.m. EDT, shares of Frontline Ltd. (FRO -3.08%) are down 9.5%, Tsakos Energy Navigation (TNP -1.72%) is down 15.1%, and Nordic American Tankers (NAT -1.85%) has dropped 15.9%.

So what's going on with the oil market this time?

3 red arrows going down and crashing through the floor

Image source: Getty Images.

So what

According to the oil price trackers at OilPrice.com, barrels of West Texas Intermediate Crude oil due for June delivery cost $16.30 a barrel -- that's 32% more today than they cost yesterday. Brent crude, the international benchmark, is up 11.6% at $22.84 a barrel.  

Those higher prices, indicative of greater demand for oil, mean that some of the tankers anchored in the Singapore Strait (remember them?) could soon depart to offload their cargoes to willing buyers, freeing up additional tanker capacity for future storage. Higher prices also reduce the incentive to store oil while waiting for oil prices to rise, which could cause more traditional storage sites to lower the levels of oil currently lapping brims in their tanks -- and reduce the need for oil traders to charter expensive tankers in which to store their crude.

Long story short, the more crude oil prices recover, the worse news it is for oil shipping stocks.

Now what

And yet, even recognizing all of this, isn't it possible that investors are overreacting just a wee bit in all their selling of oil tanker stocks today?

After all, Nordic American Tankers CEO Herbjorn Hansson just finished telling investors that he's making "tons of money" chartering boats to oil traders. If this is true for one company offering essentially a commodity service (oil storage), then it seems logical it would hold true for Frontline and Tsakos as well.

Nordic American is making so much money, in fact, that Hansson expects to pay off the company's whole $400 million debt load with the cash flowing in. That's not a boast I'd expect the CEO to make if the trend in higher charter rates was something that could be upset by a one-day wobble in oil prices.

To the contrary, comments from The Wall Street Journal (today), to the effect that "the world is awash with too much oil" and that "coronavirus lockdowns on driving, flying and industrial activity have all but eliminated the need for the stuff" suggest that even if stock prices of oil shipping companies are down today, the problem of where to store "too much oil" has not been solved -- and these stock prices will go right back up again in relatively short order.