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BWET – a new tool for tanker investors

Photo: Marcus Hand Tanker at sunrise on Singapore anchorage
Tanker at anchorage in Singapore
Early May saw the launch of The Breakwave Tanker Shipping ETF with the symbol “BWET”, an Exchange Traded Fund aimed at investors in crude oil tankers.

It trades through the NYSE Arca marketplace an all-electronic arena tied to the New York exchange, .and rather than owning vessels, BWET is a fund that invests in a “strip” of cash settled tanker forward contracts going out six months into the future. As these contracts expire, the position is rolled over, so that their average maturity stays constant at around three months. The initial allocation is 90% VLCC’s and 10% Suezmaxes.

The attraction for investors is that the ETF’s pricing will reflect tanker market sentiment, proxied in the prices of freight contracts which it hold,  and will not reflect the “noise” that comes along with the prices of traded tanker shares. Tanker share prices will certainly reflect expectations of a particular company’s performance and prospects, but can be dragged down (or, to be fair, pulled up) by broader macro-economic considerations that are not directly related to movements of oil. BWET is truly a “pure play” on the crude oil tanker markets.

These are early days for BWET - with roughly $3 million of Assets Under Management (AUM); because investors’ eyes are on oil markets and geopolitics, its AUM could grow and its price could be bid upward if sentiment on the tanker markets turns positive.

Geopolitical considerations loom large; the BWET prospectus explains that: “Shifting oil trade patterns as a result of the ongoing economic sanctions against Russia should continue to affect the tanker market for the years to come. Increased volatility in shipping rates as well as freight futures for both crude and refined products is expected to remain in place as long as the current geopolitical situation continues to greatly affect oil markets.”

The Baltic Dirty Tanker Index (BDTI), a composite of rates on individual crude oil routes, started this year around “2,100” (coming off the tanker market’s late 2022 highs) but has backed off to around “1,100” in recent weeks. Recent weeks have seen a softening of the tanker market, with non-eco no scrubber VLCCs seeing time charter equivalents (TCEs) in the low/mid $30,000 per day range, however, the last few days have seen VLCC rates moving back above the $50,000 per day level.

BWET’s manager, actually a “Commodity Trading Advisor”, Breakwave Advisors led by John Kartsonis is the same team behind the very successful counterpart BDRY for investors in the drybulk trades , which was launched in 2018. Fueled by the dry bulk runup in late 2021, BDRY was cited as the top performer among ETFs for that year, with a price that more than doubled while the S&P 500, a broad market index, was up 24% during that year.

Resources for readers:

BWET prospectus

BWET Fact Sheet