Cathay Haitong: Oil shipping enters a "super bull market" and expects the high prosperity to continue

Cathay Haithong released a research report stating that the strategic value of oil tankers has become increasingly prominent. It expects extremely high industry sentiment to remain robust, and maintains an “industry overweight” rating. Oil tanker shipping has achieved a “super bull market” across two phases, and it also offers an “unexpected option” stemming from changes in the gray market. The Middle East situation provides an opportunity for change. The firm expects that in the coming years, supply in the mainstream oil tanker market will remain rigid, ensuring that the oil tanker industry’s high-level sentiment can remain sustainable for several years. The strategic value of oil tankers is increasingly highlighted, and the value of China’s fleet is expected to exceed expectations.

The main viewpoints of Cathay Haithong are as follows:

Oil tanker shipping—long-term logic: Two-phase achievements from 2022 to 2025 of a “super bull market”—even without geopolitical conflicts, high-level sentiment will continue for years

1. First phase: Restructuring of global oil tanker trade. The Russia-Ukraine conflict at the start of 2022 triggered Russia-EU “choosing the farther instead of the nearer.” As a result, voyage distance increased significantly and demand for tonne-miles surged by more than 10%, driving capacity utilization up to a threshold and pushing industry sentiment markedly higher. 2) Second phase: Global crude oil begins to increase production. OPEC+ shifted to boosting output starting in April 2025, initiating a cycle of incremental global crude oil supply. In the second half of the year, South America will increase production significantly and keep doing so. Favorable effects from crude oil production increases in the second half of 2025 start to show, and together with the U.S. escalating sanctions against Russia, which leads to India increasing its demand for compliant VLCCs, jointly driving oil tanker capacity utilization to rise above the threshold, staying at high levels and entering a period of high-level sentiment. Particularly worth noting, long-time shipper SINOKOR actively controls more than 100 VLCC vessels. With high-capacity utilization, spot freight rates are extremely sensitive to marginal changes in supply and demand. Even a modest reduction in fleet capacity can drive a surge in freight rates. Under high-level sentiment, this will “add icing on the cake” to freight rate and profitability performance. The key takeaway is that even without geopolitical conflicts, the oil tanker industry’s high-level sentiment will continue for several years.

Oil tanker shipping—unexpected option: Changes in the gray market will provide a “supply-demand surprise” option. The mid-2026 Middle East situation provides an opportunity—non-pulse-type impact will deliver extremely high sentiment that is also sustainable

In recent years, the U.S. has imposed oil sanctions on Iran/Russia/Venezuela, causing the oil tanker market to develop a huge gray market. Batch and older oil tankers that should have been scrapped, as a shadow fleet, have provided continuous service to relevant regions, creating persistent diversion from the compliant market. Since 2025, the U.S. has focused on strengthening sanctions on shadow fleets. Seventeen percent of global VLCCs have been sanctioned by the U.S., generally being older oil tankers with ages above 20. If in the future sanctions on Iran and others are lifted, its exports will shift to compliant demand, while the related shadow fleet will likely be unable to switch back to the compliant market. Oil tanker shipping would then see extremely high sentiment that remains sustainable for several years. The Middle East situation escalating in 2026 provides an opportunity for gray-market changes. 1) Short term: Disruption at the Strait of Hormuz reduces crude oil supply and scrambles trade, driving oil tanker freight rates to a record high. Flexible adjustments by China’s fleet on shipping routes will demonstrate value beyond expectations; 2) Medium term: If the strait restores navigation, energy-strategy security could drive global inventory restocking and urgent shipping demand, which is expected to help sustain high-level sentiment; 3) Long term: It is recommended to focus on changes in the Middle East layout and gray-market dynamics. If sanctions are lifted, oil tanker shipping will exhibit extremely high sentiment that is sustainable for several years, rather than a pulse-like impact.

Oil tanker supply and valuation: High-level sentiment sustainability provides valuation upside—accelerated aging plus tight shipyards lead to rigid supply in the mainstream market

Cyclical industry sentiment level strongly determines earnings potential, and the sustainability of sentiment determines valuation upside. The oil tanker industry has an unusually scarce supply bottleneck, which will ensure that its high-level sentiment remains sustainable for several years, thereby further providing valuation upside. Since 2026, expectations of sustained high-level sentiment have driven VLCC ordering. The current share of in-hand orders has risen to 22%, and they have been scheduled out to 2030. Given tight shipyard berths, it is expected that in the coming years there will be limited incremental deliveries. At the same time, tankers are still in an accelerated aging phase. In the next five years, 27% of VLCCs will be over 20 years old. Even if in-hand orders are delivered as scheduled, it will be difficult to maintain a fleet size of vessels under 20 years old. The firm expects that over the next few years, supply in the mainstream oil tanker market will remain rigid, ensuring that oil tanker shipping’s high-level sentiment stays sustainable for several years.

Risk disclosures: Geopolitical situation, economy, sanctions, oil prices, industry policies, and safety incidents.

A large volume of information and precise analysis—right on the Sina Finance APP