The Speaker is long Frontline (FRO), the world’s largest oil tanker shipping company. The sector has been in the doldrums for over a decade, but signs are emerging that the worst is over.

First, charter rates for very large crude carriers (VLCC) have doubled to around $50,000 per day (when Frontline’s breakeven rate is $25,000). Second, US sanctions on Chinese shipowner and new maritime emissions rules have led to a tightening of supply. Third, tanker scrapping in 2019 was at the highest level in over 30 years. Fourth, banks are not lending to the sector anymore given a new ESG focus so order books for vessels are no longer growing—earlier concern was too many tankers chasing too little cargo. Fifth, demand has remained constant.

The Speaker think the stock could trade as high as $40 in the coming years. “Buy and hold.”

Source: Y Charts