Technical Analysis and Market Liquidity in Sale-and-Purchase Transactions of Second-Hand Oil Tankers

Abstract

In addition to using second-hand oil tankers to fulfil immediate shipping needs, shipowners can leverage price fluctuations in the tanker market to make vessel sale-and-purchase (S&P) transactions. Given that the profitability of vessel S&P transactions depends primarily on timing decisions, in this study, technical analysis was applied to identify the optimal transaction timing for 5-, 10-, and 15-year-old second-hand Aframax tankers. In a simulation, an S&P strategy based on technical analysis outperformed a benchmark buy-and-hold strategy, particularly for newer tankers, possibly due to the higher price volatility and lower market efficiency in the markets for these vessels. However, the lack of liquidity in the second-hand tanker market limited the performance of technical analysis in vessel trading, particularly for older tankers. These findings suggest that shipowners can select an appropriate technical indicator to profit from the lack of efficiency in the tanker market while avoiding the pitfalls caused by insufficient market liquidity.