FRO - Scorpio Tankers Frontline rally as Deutsche Bank upgrades both to Buy

2023-06-30 13:11:47 ET

Scorpio Tankers ( NYSE: STNG ) +7.2% and Frontline ( NYSE: FRO ) +4.9% in Friday's trading after Deutsche Bank upgraded both shipping companies to Buy from Hold, expecting tanker demand will increase this summer and into Q3 as refinery maintenance winds down.

While tanker market conditions have eased off winter peaks, rates remain at historically strong levels and the medium-term outlook remains positive, and crude ton-mile demand is expected to increase this year despite OPEC cuts due to growing exports from the U.S., Guyana, Brazil and Norway, Deutsche Bank analysts wrote.

Despite average spot time charter equivalent rates coming off peaks seen in Q4 2022 and Q1 2023, rates remain well above total cash breakeven levels for Frontline ( FRO ) and Scorpio Tankers ( STNG ), as well as Euronav ( EURN ) and International Seaways ( INSW ), meaning tanker companies are "still printing plenty of cash for things like quarterly dividends, opportunistic share repurchases and the repayment of debt."

More on Scorpio Tankers:

• Financial and valuation comparison to sector peers
• Analysis: Scorpio Tankers: Accumulate At Current Price
• Stock price return: Down 16% YTD, up 28% in the past 12 months

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