PBS’s Nightly Business Report

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Anne is the largest oil tanker ever to call on a Gulf of Mexico port. It did so recently in Texas. A test by Occidental Petroleum (NYSE:OXY) to see if the shale producer can more directly load its crude onto ships destined for Asia.

This comes at a time when oil shippers are desperate for new markets. The global oil supply has treaded water amid OPEC production cuts. At the same time, dozens of new tankers ordered several years ago during the oil glut are now being delivered.

ERIK BROEKHUIZEN: The reason for the market challenges is mainly on the supply side, meaning there`s too many ships relative to the amount, the number of cargoes, the number of oil cargoes in the market.

BRENNAN: As a result, shipping rates are down dramatically, and fleet operators are feeling some pain.

BROEKHUIZEN: If you look at the VLCCs, which is sort of the largest ships, the bellwether of the market that everybody focuses on, I think that market was averaged in the $50,000, $60,000 a day range in 2015. At the moment, we`re looking at the market in the high teens, low 20s. So, it`s definitely a quite significant downturn.

BRENNAN: Tanker stocks have tanked this year. But analysts say investors would welcome consolidation, since it would create more discipline for supply and capacity. And the deals have already begun. TK Tankers is merging with Tanker Investments. And Frontline (NYSE:FRO) has reportedly set cites on Generate Maritime.

Meantime, crude exports from the U.S. have doubled since last year, to more than 1 billion barrels a day. And more is heading to Asia. Meaning, once the infrastructure is there, more super tankers like the Anne may soon call to ports in the U.S., creating a new bright spot for the struggling sector.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.”

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