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What: Shares of oil tanker owner Frontline
So what: There wasn’t any direct news out about Frontline today, but competitor Overseas Shipholding Group reduced its dividend, which sent a shock to investors. Bloomberg also released an article today highlighting the tanker industry’s slow demolition rates, which are hurting owners’ revenues.
Now what: Not only are tankers not being demolished, the overall fleet is growing faster than demand can keep up. That leaves tanker owners between a rock and a hard place when trying to negotiate rates. They can either take a loss on each voyage or have an idle tanker, neither of which is desirable. I’m going to stay away from oil tanker stocks for right now, as it will take a long time for the oversupply to shake itself out.
Interested in more info on Frontline? Add it to your watchlist.
Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
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