2007

Tanker rates have leveled off – and may be starting their descent. The recent run up has been brilliant – both for Owners and bullish FFA traders, but all good things must come to an end. Doom is not imminent by any means – but the supply/demand function for January points towards softening. The oil spill by the single hulled Hebei Spirit clearly played a role in the recent spike. Now the question becomes, “Is the future what it used to be?” The upward movement in the distant FFA contracts implied that rates throughout 2008 would indeed get a lasting lift from the December spike. For this to occur – we will likely need to see a pronouncement from either a regional maritime authority, or a commercial chartering department – stating that vetting requirements will become noticeably stricter. The tanker equities, with rare exception, enjoyed the effects of the pre-holiday rate escalation, but appear to have also topped for the time being.

This is only an excerpt of Back to the Futures – 12/20/2007

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