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Oil price drop is good news for suezmaxes, says NAT

Oil price drop is good news for suezmaxes, says NAT
Nordic American Tankers (NAT) has outlined to its shareholders how the recent drop in oil prices is good news for its business.

Increased oil demand is the most significant impact of a lower oil price, according to the suezmax owner, but the reduced cost of fuel for its fleet also has a positive impact on its bottom line.

As well as the stockpiling that can be triggered by a low oil price, the tanker sector also benefits from a general increase in economic activity as savings are made by consumers and businesses alike, according to NAT chairman Herbjørn Hansson. "A saving of $20 per barrel equates to savings for the US of about $55bn annually. Such an oil price decrease has the same effect on the overall economy as a tax reduction."

"The effect of all this is growth - more investment, more jobs and more oil demand. In the US, there is now significant domestic oil production. The story is not the same other places. We see in the shipping market that volumes of oil being transported are increasing. This increases the worldwide demand for Suezmax tankers, which is positive for our business."

As demand increases, rates rise and costs drop, the suezmax fleet is also benefiting from a stable supply of ships. "We say it again - the world Suezmax tanker fleet is not growing at this time. In fact, we believe the fleet could shrink over the next few years."

As a consequence of these combined effects, NAT enjoyed improved rates in the third quarter and expects that strong revenues will continue through the fourth quarter.