Frontline may be able to sustain its 20% dividend
I've just learned that oil tanker booking fees are near record highs as oil producers scramble to ship their excess product to available storage locations, which are filling up fast. This suggests that the share price reduction in tanker companies like Frontline may be unwarranted, and they may be able to sustain their dividends in a market in which many dividends are being cut. Frontline's dividend yield is currently over 21%.
Comment:
This turned out to be a wonderfully profitable trade. I took about 10% profit late yesterday, and then bought in again this morning on the dip for another 10% ride. We're testing resistance now.
Comment:
Crude oil spot price has been rising on optimism around reopening the economy. Traders have also started to realize that there's still a reasonable amount of empty oil storage space out there, even if a lot of it is already sold. The WTI spot price is currently being squeezed between the 20-day EMA and the $20 per barrel resistance level.
A high crude oil spot price wipes out oil contango, which is bad for tankers. So if the oil spot price gets a breakout and a close above $20, that will the signal to sell tankers (perhaps even to buy puts on NAT). Personally I think it's more likely that WTI gets rejected from the $20 level and falls back below the 20-day EMA. That will be the signal for another leg up in tanker stocks.
A high crude oil spot price wipes out oil contango, which is bad for tankers. So if the oil spot price gets a breakout and a close above $20, that will the signal to sell tankers (perhaps even to buy puts on NAT). Personally I think it's more likely that WTI gets rejected from the $20 level and falls back below the 20-day EMA. That will be the signal for another leg up in tanker stocks.