NEW YORK (Dow Jones)–Oil-tanker stocks look risky as the U.S. ramps up domestic crude production, analysts at Goldman Sachs Group Inc. (GS) said Thursday.
The investment bank said the industry will face a “prolonged down cycle” as the U.S. reduces oil imports from the Middle East, resulting in fewer routes for tankers.
Goldman analyst Daniel Boyd cut his stock-recommendation rating on General Maritime Corp. (GMR) and Bahamas-based Teekay Tankers Ltd. (TNK) to sell from neutral, and downgraded Overseas Shipholding Group Inc. (OSG) to neutral from buy in a note to clients. Boyd also affirmed a “sell” recommendation for Bermuda-based Nordic American Tanker Shipping Ltd. (NAT).
Shares of General Maritime, down more than 70% over the past year, fell 5.6% to $2.20 on the New York Stock Exchange recently. Teekay Tankers’ shares fell 5.4% to $9.28 in recent trade, while Overseas Shipholding dipped 2.3% to 27.49. The stocks have tumble 25% and 42% over 12 months, respectively.
Rising U.S. crude production is “negative for the oil tankers as we expect U.S. oil production growth to satisfy all of the U.S. oil demand growth over at least the next two years,” Boyd said in the note.
Goldman also expects tanker supply growth to be greater than expected, a factor that could weigh down tanker day rates, Boyd said. Day rates, the market price to rent tankers, have been volatile in recent years and weakened significantly in the wake of Japan’s earthquake and tsunami disaster.
Goldman Sachs lowered its 2011 day-rate forecast to $28,000 from $32,500 for very large crude carriers, known as VLCCs, and to $23,000 from $24,000 for Suez-canal faring tankers.
-By Chris Dieterich, Dow Jones Newswires