HK Stock Market Move | COSCO Shipping Energy Transportation (01138) down more than 4% in the afternoon, sanctions improve recent market sentiment, increased delivery of oil tankers in the second half of the year may suppress upward momentum.

COSCO Shipping Energy Transportation (01138) fell by over 4% in the afternoon, rising 3.54% as of the time of writing, to 7.35 Hong Kong dollars, with a turnover of 1.01 billion Hong Kong dollars. Morgan Stanley released a research report stating that US sanctions are starting to affect the fundamentals and market sentiment, with global energy market dynamics driving changes in the fundamentals of oil tankers. Although the spot prices of very large crude carriers (VLCC) underperformed expectations in the fourth quarter last year due to weak demand, spot earnings have doubled in the last two trading days. The bank believes that the improvement in the spot market will support market sentiment, increasing the likelihood of a bullish argument for oil tankers this year, with global oil trade dynamics continuing to be a major driving factor. HSBC also stated that it is expected that China will replace some of the oil imports from the Middle East and the Americas, which will benefit the demand for VLCCs. The increase in demand for tankers in non-sanctioned markets benefits listed tanker companies; the increase in inefficiencies such as "ship-to-ship transfers" increases utilization rates. The bank estimates that these factors will bring incremental demand for 26 to 39 VLCCs in the non-sanctioned fleet, equivalent to 3% to 4% of existing VLCC capacity. The bank expects oil demand to grow by 0.9% this year, helping to offset potential weak demand. However, the increase in deliveries of refined oil tankers in the second half of this year may increase the supply of crude oil tankers through retrofitting, thereby limiting further increases in VLCC freight rates.