Cantor Fitzgerald

Natasha Boyden Comments: Sector Snap: Oil Tanker Companies Rise

January 25, 2012, Yahoo! Finance

Shares of companies that operate crude-oil tankers rose Monday as several analysts suggested the sector is headed for a partial recovery after a dismal 2011.

Rates for very large crude carriers not under contract were at their lowest point last year since 1994, noted Deutsche Bank analyst Justin Yagerman. Crude tanker rates are down 60 percent from their 10-year average, he said.

Yagerman expects rates to climb between 10 and 20 percent this year, as slowing deliveries of new ships drums up demand across the sector.

Rates already more than doubled last week ahead of Chinese New Year, finishing at $34,216 a day. A flurry of activity ahead of Chinese New Year is typical in vessel markets.

Though despite some encouraging signs, Yagerman said he's not predicting a rapid recovery in the tanker sector this year. While he believes a wave of restructuring is fading, Yagerman expects a drawn-out recovery from a challenging year.

He upgraded shares of Tsakos Energy Navigation Ltd. to "Outperform" from "Neutral," while holding onto his $8 price target. He kept his "Outperform" ratings on Teekay Corp. and Overseas Shipholding Group and an "Underperform" rating on Frontline Ltd.

Also Monday, Cantor Fitzgerald analyst Natasha Boyden upgraded shares of Overseas Shipholding to "Hold" from "Sell."

After spiking earlier Monday, shares of most oil tanker companies moderated or turned lower in afternoon trading with the broader market.

Tsakos rose 26 cents, or 4.2 percent, to $6.43, while Teekay gained 6 cents to reach $27.09. Overseas Shipholding lost 23 cents to hit $13.28. Frontline gained 22 cents, or 4.4 percent, to $4.95.