Spill Could Raise Shipping Rates
If the Gulf of Mexico oil spill spreads, it could prompt higher shipping rates, especially for transporting oil, an analyst told CNBC Monday.
So far, shipping in and around heavily-trafficked parts of the gulf is business as usual, in spite of the spill. But that could change if the slick expands.
“This can lead to slower drilling in the Gulf, which means more oil coming from longer distances to come and satisfy U.S. demand,” said Urs Dur, shipping and logistics analyst at Lazard.
“It could also cause steeper contango in oil prices. The steeper the contango you have, or the forward price being higher, is going to incentivize storage on tankers that will constrict supply of tankers. Tanker rates will go up."
“The best position call for this kind of scenario, tragic that it is, is OSG [Overseas Shipholding], in our opinion.”
His price target on OSG is $54.
Also, Dur recommended Dryships , an ultra-deep-water rig company, which he said that price could go to $11 from where it is now at $6.
At this point, though, said Dur, “Operation of ships in the Gulf has not been impacted.”
Durs added that the main shipping arteries and ports—the Houston Shipping Channel, the Louisiana Off-Shore Port and the Pascagoula, MS, port—have reported no decline in activity since the oil spill on April 20.
He said tankers can still avoid fouling their hulls by going around the spill. The Coast Guard is issuing advisories to all vessels on how to keep from fouling hulls. Should that happen, BP has offered to clean the hulls.