VLCC
Another way to play the sector entirely, is through the transport sector.
Jamie Carter, manager of the SWMC Small Cap European Fund is doing just that, pointing out that the transport of oil from ever more remote places in very large crude carriers makes the sector rather interesting.
“Most people might intuitively feel that the dramatic fall in the oil price at the end of last year would be a negative. In fact, the opposite is true. The forward curve of the oil price is now in contango rather than in backwardation, meaning that you are paying more for oil in the future than for immediate delivery – as the market anticipates a recovery in the future oil price,” he said.
Indeed, he added, “This phenomenon is so extreme that people are buying physical oil, chartering a VLCC and using it as “floating” storage. This in turn is sucking capacity out of the supertanker market, and people are now having to turn to product tankers to ship not only refined product, but also crude oil.”
It is unlikely that there are very many investors bullish enough on the sector to charter a supertanker, but there is no doubt that interest in the oil market remains high and will likely go higher if M&A continues to grow.
