NAT - NAT FRO DHT: Shipping Stocks Rally Friday on Suez Canal Hopes
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We’ve got a new Suez Canal crisis on our hands today. This time, the crisis involves a blockage of the canal by a massive cargo ship that has run aground. Today, shipping stocks such as Nordic American Tankers (NYSE:NAT) have seen a massive spike on the news. Indeed, NAT stock is up nearly 15% at the time of writing on today’s concerns.
Why the jump?
Well, it appears investors are betting on very strong near-term performance in the price of oil. Additionally, the price of shipping oil long distances has been given a near-term boost. For now, Nordic has stated that it may need to divert tankers around Africa to avoid the blockage. This would result in much higher fees in the near term for those shipping the oil. However, this could provide a very nice profit boost to shipping companies like Nordic who are changing routes. .
Additionally, a recent tweet from Vortexa summarized the situation very well:
Suez Canal Update [VIDEO]: "If flows remain disrupted for more than a few days, some European refiners could run short, particularly of sour crude feedstocks and tighten an otherwise weak physical European market." #OOTT #freight #oilgas #shippinghttps://t.co/7jlwlEIRa4
— Vortexa (@Vortexa) March 25, 2021
Shipping Stocks: Speculators Bullish on NAT Stock Today
It’s worth repeating that this situation will eventually get resolved. Today’s sharp near-term moves in NAT stock, Frontline (NYSE:FRO) and DHT Holdings (NYSE:DHT) are likely traders playing around with their risk models and adjusting their portfolios accordingly. Thus, I don’t expect these sorts of outsized moves to continue for very long.
That is, assuming this situation gets resolved in short order.
According to recent reports, indications are that the ship could get “unstuck” perhaps by Saturday. However, recent efforts to free the cargo vessel have proven unsuccessful. Thus, the short-term trade here may turn out to be a decent one, depending on how long this situation takes to resolve.
For now, long-term investors may want to ignore the noise on NAT stock and its peers.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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