VLCC rates face a potential crash
The bear case argued for Very Large Crude Carriers (VLCCs) is that a lack of Middle Eastern cargoes will eventually force idle ships to migrate west, creating a supply glut.
The argument
The guest argued that with Middle Eastern barrels offline, VLCCs are currently twiddling their thumbs. If owners lose patience and ballast toward western markets, the sudden influx of capacity will crash the western VLCC freight market.
The thesis, stress-tested
✓ What validates it
- ✓VLCC vessels increasingly ballasting toward the West
- ✓A drop in VLCC spot rates over the next 2 to 8 weeks
▸ Risks discussed
- ▸A sudden mobilization or reopening of Middle Eastern ports would instantly make VLCCs highly profitable again
- ▸Large private players like Synacor continuing to successfully pressure rates higher by withholding capacity
Hear it yourself
"So that would be companies like Frontline, Ticker, FRO, DHT, which is a VLCC pure play. In theory, all these companies are gonna benefit from Synacor, a private player, essentially making the market."
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