Oil Tankers In Buy Range After Breaking Out Of Bases

Key Points

• Geopolitical developments, including the Russian war against Ukraine and high crude prices, are contributing to high earnings for tanker companies.
• TORM is holding near its 10-day moving average, and may soon offer a new buy point.
• Other tanker companies, including International Seaways, Nordic American Tanker, Teekay Tankers, Tsakos Energy Navigation and Frontline are consolidating below recent highs, and may be in buy zone. 

When it comes to oil transportation, pipeline companies are attractive due to high yield and stable price performance, but tanker stocks have moved into technical leadership since the start of the year. 

Top-performing tanker companies include TORM PLC NASDAQ: TRMD, which broke out of a cup-shaped pattern on February 14. It’s now up about 10% from a buy point north of $31.65. 

TORM is worth putting on a watchlist, as it’s currently trading below a recent high of $36.60. It’s holding near its 10-day moving average. The stock may offer a new buy point if it continues to hold above short-term moving averages or even its medium-term 50-day line. 

Earnings Report Could Be A Catalyst

However, before jumping in, be aware: The company is due to report 2022 full-year results on March 16. As with any stock, a piece of unexpected news can potentially send the stock moving sharply in either direction. 

TORM’s revenue and earnings growth accelerated in the past three quarters, and Wall Street is eyeing earnings growth of 27% this year. 

U.K.-based TORM has a market capitalization just shy of $2.6 billion, putting it at the intersection of small- and mid-cap territory. As such, it won’t be the focus of much analyst coverage, as you can see using data compiled by MarketBeat. However, the two analysts who do put ratings on the stock agree on a “buy.” 

TORM is among tanker stocks making a big move lately, but it’s far from the only standout within its industry. Other worthy contenders include: 

• International Seaways Inc. NYSE: INSW: The crude transporter was up 35.36% in the past three months. The stock is trading in a similar fashion to TORM, having rallied out of a base, and is now consolidating those gains. Wall Street sees 30% earnings growth this year.
• Nordic American Tanker Ltd. NYSE: NAT: Has returned 33.64% in the past month. The stock broke out of a cup-shaped base following its earnings report in late February, rallied to a new high, then pulled back to briefly tag its 10-day moving average. That brief pullback offered a new buy opportunity. The stock rallied to a new high of $4.65 on March 8, but was trading near its session low later in the day, although still with gain of 1.59%.
• Teekay Tankers NYSE: TNK: The Bermuda-based company cleared a cup base with a buy point above $36.61 on February 9, then just kept going. Shares got a further lift on February 23, gapping up 13.28% following better-than-anticipated fourth-quarter results. The stock is up 37.11% in the past month and 59.12% in the past three months. 
• Frontline Plc NYSE: FRO: The mid-cap cleared a cup-with-handle base above a buy point of $14.60. Shares have rallied a whopping 27% since then. Shares are currently trading slightly above their 10-day moving average. They remain in a buy range as long as they don’t pass their previous high of $19.29. 
• gained over 3%, also soaring above the 20%-25% profit-taking zone. Analysts expect 37% annualized EPS growth in 2023. The oil tanker reports Q4 earnings in Tuesday's premarket.
• Tsakos Energy Navigation Ltd. NYSE: TNP: This Greek company is following a familiar pattern: On February 7, the stock cleared a base that began in November. Shares are up 25.07% in the past month and 41.84% in the past three months. The stock is currently in a buy range after consolidating just above its 50-day average. Would-be investors should be cognizant of not chasing the stock too far beyond its March 8 high of $24.69.

These stocks are trading essentially in unison, as there’s plenty of business to go around, given the industry's current state and the world. 

Benefiting From Geopolitical Events

It may sound callous, but industry analysts say the oil tankers benefit from Russia’s war against Ukraine. Geopolitical events have long benefited particular industries while others suffered, with the pandemic offering perfect examples of each. 

One development driving the boom in the tanker industry is the increase in global crude prices since its early 2020 lows. But the war caused the direct effect of reworking oil tankers’ maritime routes, to avoid zones of conflict. In addition, sanctions have forced many nations to find alternatives to Russian oil. 

As you’ve seen, many of the tanker stocks cleared bases, then rallied, and are now consolidating again. That can offer fresh buy points, but don’t chase stocks if they once again go into rally mode.