Oil Tanker Stocks Extend Rally Despite U.S. Talks Of Banning Oil Imports From Russia

While Russia’s oil exports are crashing and Secretary of State Antony Blinken said over the weekend the U.S. is discussing a ban on Russian oil following its invasion of Ukraine, investors aren’t anticipating a severe impact on the bottom line for the tanker companies that transport fuel around the world.

Shares of oil tanker companies like Euronav and Frontline have surged double digits this year as demand for fuel rises, and the war in Ukraine has hardly slowed the rally. But the conflict is still forcing executives to scramble to safer routes, particularly after two cargo ships from Estonia and Bangladesh were reportedly sunk by missile explosions last Thursday.

“There has been an exodus of tonnage out of the Black Sea. We had a couple of vessels in there before the war started, and I was very happy to see us heading down to the Bosphorus to get the heck out,” says Lois Zabrocky, CEO of New York-based International Seaways, which operates a fleet of 86 ships that sail all over the world. “We’re not enacting any fresh contracts to load Russian oil cargoes.”

For the dwindling number of orders that are still making it out of Russia, Jefferies shipping analyst Randy Giveans says prices to secure space on tankers have surged as much as tenfold with most companies unwilling to send ships into a war zone. Rates are rising from other ports as well, with charterers paying a premium to ship fuel on longer journeys to meet demand.

“There’s going to be a lot less crude going from Russia into Western Europe,” Giveans says. “That crude is going to have to be replaced from further away distances, be it the U.S., West Africa, the Middle East, the Arabian Gulf, wherever.”

Shipping companies also have to keep tabs on their employees’ safety, with Ukrainians and Russians well-represented on many ships. According to the International Chamber of Shipping’s Seafarer Workforce Report, almost 200,000 seafarers are Russian and 76,000 are Ukrainian, making up 14.5% of the 1.89 million seafarers worldwide. Russia trails only the Philippines as the second-most prevalent nationality at sea.

Other firms with significant presences in eastern Europe suffered last week. Pennsylvania software developer EPAM Systems, which has the majority of its staff based in Ukraine, Russia and Belarus and saw its market value slashed in half last week and internal tensions reach a boiling point. Without on-the-ground offices in Ukraine, most tanker stocks have avoided the same fate thus far – International Seaways gained 3% last week and another 5% Monday morning to bring its gains for the year to 32%. Zabrocky says International Seaways has about a dozen Ukrainians and 90 Russians among its seafaring staff of 2,000.

“When you sign on and go to sea for four or five months and leave your family home, that’s very difficult,” she says. “We have people that are talking to them all the time and looking to see if we can relieve them where they want to be relieved.”