Crash of Frontline, Teekay Nears Amid Record Crude, Tanker Glut

(Bloomberg) -- The record increase in oil prices and the unprecedented number of new tankers transporting crude is a stock market crash waiting to happen.

That, at least, is the growing consensus among analysts who say the widening gap between West Texas Intermediate crude and the rate for supertankers shipping Middle East oil to Asia means industry titans Frontline Ltd., Overseas Shipholding Group Inc. and Teekay Corp. have unsustainable valuations.

The Bloomberg Tanker Index has risen 19 percent in the past two years, even as reight rates sank 38 percent. The price of marine fuel, the biggest cost for shipowners, has dvanced 73 percent to a peak of $446.50 a metric ton and the number of ships available is near a record.

``It doesn't look good at all,'' said Andreas Vergottis, who helps manage $1.2 billion at Isle of Man-based Tufton Oceanic Ltd., the world's biggest hedge fund dedicated to shipping. ``We've got a wall of worry and a wall of new buildings flooding the market ahead of us.'' He said the stocks are 30 percent overvalued.

Frontline, the world's largest tanker company, gained 50- fold in the past nine years, helping to make Chairman John Fredriksen into Norway's richest man, with a fortune that Forbes magazine estimates at $7 billion. Frontline shares this year have gained 33 percent to 238 kroner in trading on the Oslo Stock Exchange.