The Tanker Trade: COVID-19 + Floating Storage

The tanker trade was a very popular thematic trade in spring 2020 which led to immense trading volumes; one stock in particular: Nordic American Tankers (NYSE:NAT) enjoyed an all-time record daily volume. This ‘tanker/contango’ or ‘floating storage trade’ lasted from March 2020 to May 2020 and developed due to a COVID-19-related collapse in global oil demand in early-2020, combined with an initial Saudi ‘Oil Price War’ initiated on 8 March. I flagged this trade on Value Investor’s Edge that weekend in March, and I brought the thesis public on Seeking Alpha on Friday, 13 March.

Crude tanker stocks performed wonderfully from mid-March to end-April, but trading momentum fizzled as the enormous oil contango evaporated, and OPEC+ did an exceptional job of holding to their unprecedented export cuts. Additionally, the global economy (with the notable exception of air travel and related jet fuel demand) opened up fairly rapidly, which helped oil markets balance. We therefore had a neat boom-and-bust trading cycle over the course of three months (March-May). We then had four months of residual ‘hangover’ from June-September.

Trend Analysis & ‘Popularity’ Reflection

During the brief time period from mid-March through early-June, there was more interest in shipping trades than at any point I can recall in recent history. The only thing close was last October-November during COSCO sanctions, and if we utilize Google trends for “oil tankers” and “contango”, we can see the interest levels clearly pop out. First, “oil tankers” rose up in fall 2019, but then a massive spike in “contango” interests fueled a much longer-running trend in “oil tankers” during April and May.

Interestingly enough, “contango” peaked 19-25 April and then dropped off while “oil tankers” peaked 19 April to 2 May and then dropped off. Both these drops marked