The Jones Act tanker segment remains highly sensitive to supply and demand but any change in dynamics could provide positive outcomes for OSG, CEO Samuel Norton said during a conference call Wednesday to discuss the company’s second-quarter results.
Changes to the Brent/WTI spread would be an indicator for potential changes in crude flows, specifically if the WTI cost drops in relation to Brent, leading to the potential cost-effective option of moving oil from the US Gulf Coast to the US Atlantic Coast, Norton said.
That movement could increase ton-mile demand for its Jones Act tankers.
The tankers have been plagued by a decline in daily earnings and a subsequent reduction in time-charter equivalent earnings, Chief Financial Officer Dick Trueblood said.
The decline is largely a result of a switch to moving refined petroleum instead of crude due to the reduction in demand for transporting crude in the US, Norton said. He added that rates for moving refined petroleum were lower than those for moving crude.
OSG’s current focus continues to be on three niche markets — lightering, maritime security program vessels and shuttle tankers.
“Shuttle tankers continue to bring welcome cash flow,” Norton said, along with lightering operations in Delaware Bay where it transferred 174,000 b/d in the second quarter.
“Generally, we consider the market in real terms to be tighter than what would be seen in static analysis,” Norton said.