Frontline has agreed to buy 10 Suezmax oil tankers from Trafigura in a cash and share deal worth up to $675 million which will make the Geneva-based trading firm the group’s second biggest shareholder.

Under the terms of the deal Trafigura will take an 8.5 per cent stake in Frontline valued at $128 million, and will receive a cash payment of between $538 million and $547 million.

The agreement will allow Frontline, which is controlled by Norwegian-born billionaire John Fredriksen, to boost its future dividends, the Oslo-listed tanker operator said.

Frontline and Trafigura, together with dry bulk shipping firm Golden Ocean, announced a marine fuel partnership earlier this month ahead of a shake-up in regulation that will enforce cleaner fuels for ships.

Frontline has agreed to time-charter all the 10 vessels, which were built this year and fitted with exhaust gas cleaning systems known as scrubbers that will help them meet the upcoming marine fuels rules, until the deal closes.

"The price is reasonable, and they are (fitted) with scrubbers so ... I think it’s cheap," Frontline Chief Executive Robert Hvide Macleod told Reuters. "The market is about to firm considerably so I think the timing is good."

Crude tanker freight rates have been under pressure for the best part of 2019 but are expected to improve later this year, lifted in part by the upcoming fuel regulations.

Frontline also has an option to buy a further four vessels and agreed to charter five of the vessels back to Trafigura for three years at a daily base rate of $28,400 with a 50 per cent profit share above the base rate, the trading firm said.

At a price of about $66.5 million to $67.4 million per vessel based on Frontline closing price, the deal is in line with current market values, according to an Arctic Securities research note.

"We see the timing of adding high-end tankers with scrubbers at current prices as very compelling, just as the market starts to move," the brokerage added.