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Euronav, DHT, Frontline, Scorpio Tankers, and Nordic American rebound from the other day’s sell-off.

What took place

Euronav ( NYSE: EURN) DHT Holdings ( NYSE: DHT) Frontline Ltd ( NYSE: FRO) Scorpio Tankers ( NYSE: STNG) Nordic American Tankers ( NYSE: NAT)

These are simply a few of the oil tanker carrier stocks that are rebounding this early morning together with a just-as-widespread rebound in the fortunes of oil manufacturer stocks today, after Monday’s market sell-off

But if you ask me, this is type of the reverse of the response one would anticipate.

Oil tanker foredeck

Image source: Getty Images.

So what

I suggest, think of it. Saudi Arabia cut costs on its crude oil by $6, $7, even $8 a barrel the other day Oil markets without delay broke down, with costs on Brent crude toppling more than 25%in between Friday’s close and Monday’s open. Oil got … a great deal less expensive, and while that’s bad news for companies that produce oil, if there’s something bargain hunters know, it’s that when things get cheaper, you buy more of them.

And that means oil shippers need to ship more of them.

And hence oil carriers must profit more from those lower oil rates.

Now what

Today oil costs are rebounding. The expense of a barrel of Brent is up 6%from yesterday, back above the $36 level. WTI crude is selling for more than $33 More costly oil, it appears to me, would really be type of problem for business– and stocks– associated with shipping oil, since it will temper demand for the product.

Here’s a theory: Yesterday it kind of looked as if the world were ending– and it definitely looked that method to anybody who owned an oil stock, as concerns installed that oil would get so inexpensive they ‘d go out of organisation. Of course, if that did take place, those oil companies that disappeared wouldn’t be shipping any oil any longer, and that would be bad news for oil shippers.

Maybe what we’re seeing today is investors in oil tanker operators breathing a sigh of relief. Maybe, if oil costs decrease– however not too much — that’s actually the Goldilocks scenario that oil tanker investors ought to be wishing for.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Rich Smith has no position in any of the stocks pointed out. The Motley Fool has no position in any of the stocks discussed. The Motley Fool has a disclosure policy

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