Ahead Of The Bell: Tanker Industry Upgraded

NEW YORK (AP) — Expectations for an economic recovery in 2010 and a rebound in oil demand prompted an analyst to raise his outlook for the tanker industry on Friday.

As the economy mends its recessionary wounds, consumers and businesses will demand more energy, triggering an uptick in oil shipping activity, according to FBR Capital Markets analyst Robert MacKenzie.

MacKenzie upgraded the tanker industry to "Overweight," based on International Energy Agency's oil demand growth projections and a shifting seaborne transportation landscape. The EIA expects oil demand growth to resume in 2010.

MacKenzie noted that demand for oil in developing countries will further boost demand growth for seaborne shipments.

Adding to industry gains, day rates for very large crude carriers will likely rise as climbing demand is met with a strained supply of carriers. MacKenzie expects very large crude carrier day rates to increase to $33,000 in 2010 and $37,000 in 2011, up from 2009 levels of $29,000.

MacKenzie ranks Frontline Ltd. as an industry top pick, upgrading the tanker company to "Outperform" from "Market Perform." He raised his share price target to $33 from $23.

Frontline is best positioned to gain from the coming industry resurgence, MacKenzie said.

MacKenzie maintained his "Outperform" rating for Overseas Shipholding Group and General Maritime Corp.