Teekay Tankers - Well-positioned to cash in on opportunities from a shift in trade patterns

Mid-sized crude tanker demand and day rates improved substantially from March after remaining under pressure at the beginning of 2022 because of Covid. However, increased tension between Russia and the West in the aftermath of the Russia-Ukraine conflict and Europe’s attempt to reduce the dependence on Russian energy resources opened new avenues of Russian crude exports to long-haul routes from ports in Western Russia to Asia (China/India). Growing trade on these long-haul routes favoured mid-sized crude carriers as tonne-mile demand increased. Teekay Tankers (TNK) – a company with a large fleet of mid-sized tankers and a high spot exposure - benefitted substantially as its spot earnings surged in the past two quarters.

Consequentially, TNK’s stock was on rally over past eight month to post a hefty gain of 199.3% YTD and has substantially outperformed the Drewry crude tanker equity index, which recorded a substantial gain of 128.2% YTD. On the other hand, S&P 500 remained under pressure amid fears of potential recession and uncertainty due to increased tension between Russia and the West. While full European
sanctions on energy imports from Russia will come into effect from 5 December, we believe the mid-sized crude carrier will continue to benefit from the shifting trade patterns as exports from Russia to Asia will rise further.