On 14 Jul, the West and Iran agreed to freeze Iran’s nuclear programme and, in exchange, gradually relieve the sanctions on the Iranian economy.
This agreement allows Iran to export oils and natural gas to the western countries to increase the oil supply of the world, which has already been greater than the demands. Iran has the 4th greatest oil reserves and the 2nd greatest natural gas reserves in the world.
The oil prices have already been declining due to the US shale oil and Saudi Arabia refusing to decrease its production, but the markets haven’t fully reflected the benefit that oil tankers would get from the increasing oil supply.
The two ways that oil tankers can benefit
If the oil price is decreasing due to the increasing supply not the decreasing demand, then oil tankers can benefit from it in the following two ways. Firstly, the tankers will carry more oils, and secondly the cost of transport will decrease due to the cheap oil, as the tankers need oils to operate.
Since June, Baltic Dry Index, the index for the price for the ship transport, has been radically increasing. One of the causes is said that the tankers are used as the storage for the excess reserves of oils. If it is true, this will be a long-term trend as long as the oil supply is kept to be extraordinary.
Teekay Tankers (NYSE:TNK)
One of the stocks that can benefit from the situation would be Teekay Tankers (NYSE:TNK; Google Finance). This company has just revived from the sales decrease in 2014 due to the depreciation of the ship transport price, and the revenue for the first quarter of 2015 was 68% more than the same quarter of 2014.
The stock price is now about $7.5. The analysts expect its earnings per share of $1.36 in 2015 and $1.19 in 2016, so it can be reasonable to assume that the price could go up to around $10. When you invest, it would be also necessary to pay attention to the possible demand decrease in the world economy, especially in China.