CITIC Securities: Continue to emphasize that the leading oil transportation company’s profits are expected to hit a new high in 2026

Topic: The market is waiting for a bargain entry—focus on the three layout lines of energy, growth, and policy

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CITIC Securities Research | Written by Shi Min Hu, Qinghuan Zhang, Muxin Lin

The outbreak of the US-Iran conflict greatly increases the “energy security” needs of major consumer countries. The asset attributes of oil tanker fleet assets are gradually shifting from a “low-return, strong-cycle” pattern to “just-need strategic assets.” The Strait of Hormuz’s passage capacity remains a key variable. In the short term, adjustments to supply chain methods lengthen route distances; the US release of strategic petroleum reserves pushes up TD22 (Gulf of Mexico–China) freight rates. Once the Strait’s passage capacity partially recovers, replenishment demand is also expected to become a catalyst for an upcycle. In the recent rise in freight rates for Aframax and other vessels, the main driver is a sharp increase in regional trade arbitrage demand. The supply chain link with the greatest disruption impact is the bottleneck link, and at the current time the bottleneck is mainly the vessels. With the blockade of the Strait, a new short-term supply chain balance has emerged; it is expected that in April, freight rates from the Gulf of Mexico and the Red Sea to the Far East may be in the 150,000–200,000 range (in terms of the same unit as cited above).

▍The Strait’s passage capacity remains a key variable. In the short term, rerouting through the Red Sea and the Gulf of Mexico can release strategic reserves to ease the crude oil trade gap. In the medium term, if passage capacity is partially restored, replenishment demand will bring a demand pulse.

In 4Q25, China Merchants Energy Shipping and COSCO Shipping Energy Transportation’s net profits increased by 56.0% and 124.6% year-on-year to 2.71 billion and 1.31 billion respectively (in RMB). Benefiting from the increase in the demand side’s sanctions by the United States on oil trade with Russia and Iran since August, compliant demand has seen structural improvement. At the same time, an increase in the number of sanctions imposed on shadow fleets suppresses the growth of compliant transport capacity, driving TD3C TCE to grow 1.87x year-on-year from September to November. The outbreak of the US-Iran conflict greatly increases the “energy security” needs of major consumer countries. According to data from ShipView, on April 1–April 5, the number of vessels passing through the Strait of Hormuz was 11/12/11/14/16 (with 127 vessels on February 27); among them, oil tankers accounted for 1/3/0/0/2 vessels (with 16 vessels on February 27). In the “Oil Tanker Shipping Cycle Weekly Series—Discussion on Limited Passage Through the Strait of Hormuz” we released on March 26, we proposed: “Focus on marginal changes in the Strait of Hormuz’s passage capacity. In the short term, adjusting the supply chain methods lengthens route distances, and the US release of strategic reserves pushes up TD22 (Gulf of Mexico–China) freight rates. Once the Strait’s passage capacity partially recovers, replenishment demand can also become a catalyst for the shipping cycle’s upward move.”

▍With Gulf of Mexico volume being released, freight rates have continued to rise over the past two weeks to about 150,000 USD/day. The extended port is also nearing its maximum export capacity of 5 million barrels/day. Against the backdrop of the Strait being obstructed, a new short-term supply chain balance has emerged; it is expected that in April, freight rates from the Gulf of Mexico and the Red Sea to the Far East may be in the 150,000–200,000 range.

The obstruction of the Strait of Hormuz leads to a reshaping of the supply chain. On one hand, Saudi Arabia adjusts its supply strategy, transferring some TD3C route cargo volumes to the Red Sea’s Yanbu port; it is expected that the recent east-west pipeline export volumes are already close to the maximum export capacity of 5 million barrels/day, and combined with crude oil rerouted from Fujairah and Omani ports, the volume realized is 6 million to 7 million barrels/day. On the other hand, the United States gradually releases 172 million barrels of strategic crude oil reserves within 120 days (equivalent to 1.433 million barrels/day). Among these, TD22 (Gulf of Mexico–China) TCE rises from the low of 125,000 USD/day in the week of March 20 to 149,000 USD/day in the week of April 3. In the week of March 27, Suezmax and Aframax TCE surged to 32.6/28.0 hundred-thousand USD/day (i.e., 3.26 million/2.80 million USD/day) — rising 3.5x and 4.0x respectively compared with early January. The increase in freight rates for smaller crude oil vessels is mainly due to a substantial increase in regional trade arbitrage demand. The supply chain link with the greatest impact from supply chain disruption is the bottleneck link, and at the current time the bottleneck is mainly vessels. Aframax, thanks to its flexibility, performs particularly well.

▍New orders are expected not to remove the strong constraints on VLCC supply in 2026–2028. Over the next three years, VLCC delivery volume may be 140–160 vessels; it is expected that this is still not enough to meet replacement demand. The rapid expansion of Sinokor’s fleet will increase concentration and reshape the freight-rate mechanism.

On March 30, 2026, China Merchants Energy Shipping announced that it has signed a contract for the construction of 10 VLCC oil tankers (with dual-fuel design reserved). The total contract price is approximately RMB 8.566 billion; the delivery schedule is from 2028 to 2030. Concerns have been raised in the market due to new ship orders from leading shipowners. It is expected that most new order deliveries will take place in 2029 and beyond. The expected VLCC delivery volume in 2026–28 is 140–160 vessels. As of the end of March, the proportion of VLCCs with a fleet age of over 20 years is 20%, and the previous delivery peak was concentrated in 2008–2012. Therefore, fleet aging will accelerate over the next three years. We expect the VLCC supply side to remain under strong constraints in 2026–28. From the assumed scenario of the US-Iran conflict, if Iran is subject to long-term US sanctions intensification, adjustments in supply chain methods will lengthen route distances. At the same time, Venezuela’s exit from the black oil market will further concentrate shadow fleet operations in exporting crude oil to Iran. Under forced sanctions, shadow fleets operate inefficiently and are mostly old vessels. Therefore, if Iran lifts sanctions, a large number of VLCCs with fleet ages of 18–20 years will face scrapping and exit.

▍Risk factors:

A sharp increase in VLCC transport capacity at scale; downstream replenishment demand for inventory falling short of expectations; geopolitical conflicts impacting beyond expectations.

▍Investment strategy.

The outbreak of the US-Iran conflict greatly increases the “energy security” needs of major consumer countries. The asset attributes of oil tanker fleet assets are gradually shifting from “low-return, strong cycle” to “just-need strategic assets,” and there is still room for full pricing to be realized. Continue to emphasize that in 2026, the profits of leading players in the oil tanker shipping sector are expected to hit new highs.

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Responsible editor: Lingchen