Weak outlook
We reiterate our view (held since March 2016) that 2017–2018 will be challenging for crude tankers. We see more risk of a weak winter season given the current oversupply and US refinery outages lowering crude demand. Low VLCC spot rates could boost scrapping, in our view, but with docking schedules for vintage VLCCs back-end loaded to 2019, we consider this unlikely; the option premium to sit and wait for a recovery is at a record low, with market values just above scrap prices. We reiterate our HOLD recommendation but have cut our target price to NOK42 (NOK52).
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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