Here's why this oil tanker billionaire had a good day amid the market collapse:
A quick-witted trader today could have bought 2 million barrels at $31/bbl, then turned around at sold the crude today for June delivery and had plenty of margin to lease a supertanker for about $30,000 per day and store the oil on the water until delivery, locking in a gain on the order of $2.5 per barrel, or about $5 million per supertanker. “So the current moves we find very compelling,” writes MacLoed.
Frontline has 24 very large crude carriers, 28 suezmax tankers, and 20 aframaxes, with an average age of just 4 years. It bought a handful of tankers last year from oil trader Trafigura in exchange for 8.5% of Frontline shares. There are risks. In June 2019 one of their oil tankers Front Altair was traversing the Persian Gulf when it was hit by a blast, presumably an Iranian mine. Designed to withstand such an incident, there was no spill of oil. It wasn’t the first time Fredriksen’s ships have been attacked before — back in the early 1980s, when he was moving Iranian oil as the Ayatollah’s lifeline during the Iran-Iraq war, three of Fredriksen’s ships were hit by Iraqi missiles.
It’s a rollercoaster business that has generated billions of dollars in dividends for Fredriksen during the good years then required a $500 million equity injection when tanker rates collapsed alongside America’s fracking boom in 2012. Last year tanker rates surged 90% in October to more than $100,000 per day after the U.S. sanctioned Chinese shipper COSCO for moving crude oil out of Iran, only to drop in January. Will this turn around continue.
The value of Fredriksen’s 46% stake in the company is nearly $600 million. The bulk of his $10.4 billion fortune is in diversified investments, including a $1.5 billion stake in leading salmon farmer Mowi.
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