Guotai Haitong Securities has released a research report stating that while geopolitical tensions may fluctuate, the medium-to-long-term investment thesis remains intact. The firm anticipates sustained prosperity in the crude oil shipping sector and advises investors to watch for bottom-fishing opportunities.
The report outlines that the period from 2022 to 2025 marks the initial phase of a "super cycle" for oil tankers, characterized by an accelerated aging of the global fleet over the next five years. This, coupled with tight shipyard order books, solidifies a supply bottleneck that supports the sector's strength.
According to the analysis, even in the absence of geopolitical conflicts, the high level of industry prosperity is expected to persist for several years. Should the Bab el-Mandeb Strait resume normal operations, the utilization rate of oil tanker capacity would return to high levels, with longer-haul voyages and restocking demand providing further tailwinds. This scenario would ensure strong profitability for tankers in 2026-27, with dividends underpinning the valuation floor.
Additionally, if sanctions on Iran were to be lifted, the crude oil shipping market could experience a "demand surprise." Compliance demand would increase by 5%, and the shadow fleet would find it difficult to return to the market, potentially creating an exceptionally prosperous period lasting several years and opening up room for valuation upgrades.
Key highlights from the high-frequency tracking data in the report are as follows:
On the Strait situation, the brief reopening from mid-June to early July caused freight rates to spike before retreating. Since mid-July, renewed geopolitical tensions have impacted the Bab el-Mandeb Strait, leading to another reduction in Persian Gulf exports and a decline in shipments from the Yanbu port.
Regarding demand and freight rates, while Middle East exports have contracted over the past month and production increases from the US Gulf and South America have been slow, shipowners remain resolute in holding prices firm due to expectations of a tightening supply-demand balance in the medium term. VLCC time charter equivalent (TCE) rates continue to hold at one-year time charter levels.
Tracking Chinese tanker operators, the report notes that tankers from COSCO Shipping Energy Transportation that were delayed in the Persian Gulf in June have all departed. In July, two VLCCs that had detoured via the Suez Canal have also exited the Red Sea. Currently, Chinese-operated tankers are operating efficiently outside the Gulf.
On the export side, with the brief reopening of the strait, Middle East exports partially recovered, but as geopolitical issues resurface, the US Gulf has not yet increased production again. Global crude oil seaborne exports grew by 10% month-on-month in the mid-June to early-July period, yet were still down 5% year-on-year. Since mid-July, with both the Strait of Hormuz and the Bab el-Mandeb blocked, Middle East exports have declined again and the US Gulf has not ramped up output, causing global crude seaborne export volumes to drop by more than 10% year-on-year in the past two weeks.
On the import side, the brief reopening window was limited, and restocking demand has yet to materialize. Asia accounts for over 60% of global crude oil seaborne imports and is highly dependent on the Middle East, making it the region most directly and significantly affected by the conflict. European imports are more diversified and thus less impacted. The effect on imports is lagging, with global crude oil seaborne imports recovering month-on-month in July but still contracting by 3% year-on-year. China and India have shifted to increased Russian crude imports, while Japan has turned to the US Gulf, with restocking demand not yet evident.
Risk factors cited in the report include geopolitical risks, economic volatility, sanctions, oil price fluctuations, potential delays in environmental policy implementation, and safety incidents.