Oil tankers

Oil tankers are a very crowded trade at the moment (Kupperman, et al) because of the very obvious contango in the oil futures. You can see how they are a crowded trade because many of these companies trading have trading volume that is a ridiculous volume of shares outstanding. The day traders are flipping shares like pancakes. The various stocks have been very volatile, and options trade at implied volatilities of over 100%.

Today is the first day I can recall in awhile that the tanker stocks have gone up despite the contango converging a little bit – spot oil today is up $1 while futures 2.5 years out are up about 20 cents.

Usually when you see that situation in trading (stocks going up despite the fundamental being in rough shape) it aligns well for a reasonable probability short-term trade.

Just be warned the sector is full of foreign players that do not in any way have a long-term sense of shareholder value. All of these shipping companies are going to report gigantic profits in at least the next quarterly reports, however.

I’ve attached a few names of companies in the shipping field. Again, it’s a miserable industry that gets their day in the sun once a decade, and that time is definitely now. Their time in the sun usually lasts for half a year before they get a massive case of sunburn and become cancer for shareholders again.