By Avi Salzman

Oil prices have been rising this year as geopolitical risks multiply, from Venezuela to Russia to Iran. Headlines can send the price of crude up -- and sometimes down -- by several dollars in a day.

But the oil market looks mild compared with the oil tanker market.

The cost of renting a large crude tanker traveling from the Middle East to China -- one of the most common routes -- has more than tripled since the start of the year to $126,000 a day. The cost to move crude from Brazil to Asia has likewise jumped. And the increase in rates has been a huge boon for the stocks of companies that operate those vessels. Frontline, one of the crude tanker companies, is up 37% this year. DHT, another player, is up 18%.

"Removing the leader of Venezuela, hiring oil traders to quickly move oil that had been stockpiled in sanctioned tankers, and pledging significant investments to a country with the largest oil reserves in the world, but dilapidated infrastructure, checks many boxes on the positive catalyst list," wrote Evercore analyst Jonathan Chappell.

There's tension in the waters near Iran too, as the U.S. contemplates military action. Much of the world's crude flows through nearby channels like the Strait of Hormuz. The U.S. has been tightening sanctions on Iran and Russia, impacting what kinds of vessels can carry their crude and to which destinations.

The result is that rates to transport oil have soared. Chappell is wary of chasing the rally, given the history of the tanker industry. "Since the beginning of 1990, very large crude carrier rates have broken through the $100,000/day threshold 23 separate times. In only 7 of those occasions, rates remained above $100,000/day for more than 4 weeks, and in only 3 of those periods the duration lasted 8 weeks or longer," he wrote.

What's more, companies have been building new crude tankers, and for the first time in six years, the supply of tankers looks like it will outpace demand growth. That usually presages a decline in rates.

That said, Chappell thinks it's just as foolish to short the stocks. A ratcheting up of tensions could cause rates to rise even more. He suggests investors consider something else: buying the stocks of companies that transport refined products. They have a better supply-demand setup this year, he says. Among the names he likes are Scorpio Tankers and Ardmore Shipping.

Write to Avi Salzman at avi.salzman@barrons.com

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February 04, 2026 18:53 ET (23:53 GMT)

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