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Teekay Tankers - The Best Opportunity On The Water

May 06, 2020 8:44 AM ETTeekay Tankers Ltd. (TNK)66 Comments
Connor Clark profile picture
Connor Clark


  • Significantly reduced demand caused by COVID-19 paired with inadequate OPEC production cuts has locked crude oil in contango.
  • With oil storage dwindling, TNK can leverage their storage capacity to provide oil producers with an alternative storage method.
  • TNK’s high proportion of spot rate vessels allows them to benefit from skyrocketing tanker rates, as oil production continues to outweigh demand.

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This article was co-authored by Bayan Alizadeh.

With a market cap just above $750 million, Teekay Tankers (NYSE:TNK) is well poised to benefit from the flood of crude oil in the market, due to inadequate OPEC action and overall reduced demand for oil globally in the midst of COVID-19. At the core level, their business involves transporting oil to where it is needed around the world. With a robust fleet of over 50 tankers, they are capable of carrying both crude oil and clean petroleum on their vessels, which hedges them nicely against the risk of a flattening contango of oil prices in the near future.

Founded in 1973, TNK is the world's largest mid-sized tanker company. The company has transformed from a regional shipping company into one of the world's biggest players in marine energy transportation.

While their usual business revolves around transporting oil, recently the demand for oil storage on tankers has heavily increased due to the global surplus of oil caused by the pandemic. This is great for TNK because instead of taking long haul journeys from Saudi Arabia to China that are extremely costly, TNK can now make more money anchoring offshore. Given that their largest cost is fueling their vessels and that oil storage is in high demand, TNK can now increase their revenue while decreasing their costs by storing oil instead of transporting it.

Beneficial Market Conditions

In the aftermath of the historic expiry of the May futures contract for WTI crude, which saw the price of this contract

This article was written by

Connor Clark profile picture
Looking for quality positions in growth companies with long term value. Also interested in trading volatility in the options market. I co-author with Bayan Alizadeh.

Analyst’s Disclosure: I am/we are long TNK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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