Tsakos Energy Navigation - High exposure to mid-sized crude carriers offers attractive investment opportunity

The crude tanker market remained volatile in 2022 YTD. While the year began on a sluggish note for tankers amid the Omicron-led demand concerns and high oil prices which limited seaborne trade, the market turned favourable for shipowners after the Russia-Ukraine conflict that led to higher spot TCE rates of tankers in general and of mid-sized crude carriers and product tankers, in particular. This
supported the uptrend in the Drewry crude tanker equity index that gained 25.2% between the last week of February and end of May, before declining in June until the first half of July due to seasonal weakness and normalising spot earnings of mid-sized tankers, especially in the Black Sea and Med. The index trended upwards again from the second week of July on the back of strengthening vessel earnings in the spot market. Cumulatively, the index registered growth of 87.6% YTD. Trending in line with the broader tanker market, the stock price of Tsakos Energy Navigation (TNP) surged 122.1% YTD due to strong spot TCE rates for tankers on several major trading routes coupled with profit-sharing on several TNP vessels locked on time charter.

We believe the seasonal weakness in spot rates of tankers over the next few weeks can lead to some correction in TNP’s stock price in September before it trends upwards again in the fourth quarter on the back of strong vessel earnings and improving seasonal demand. However, a potential global economic slowdown or recession could be a downside risk for the company.