(Dow Jones) A flagging economy and more domestic production is leading to decrease in US oil imports–bad news for tankers. Frontline (FRO) expects further increases in US output, which will likely hurt tanker demand, particularly that of very large crude carriers. While it’s looking for solutions, FRO calls the upcoming period “challenging.” Sterne Agee’s Salvatore Vitale tells Dow Jones that a big concern is reductions in longest-haul voyages between the Middle East and Europe. A weak VLCC market hurts not only FRO, but also Overseas Shipholding (OSG), which has pretty large VLCC fleet. It’s down 16% at $10.63 after earlier hitting a 26-year-low of $9.92. FRO tumbles 40% to $3.14, hitting a 9-year nadir, as it also warns of potential covenant breaches and funding needs.
– by Corrie Driebusch, Dow Jones Newswires