Zheshang: VLCC freight rates continue to reach new highs, the peak season for oil transportation in Q4 is promising.

Zheshang released a research report stating that on September 11, the VLCC TD3C freight rate reached $74,338 per day, a year-on-year increase of 113%, exceeding the data for the peak season in Q4 of 2023 and 2024. The bank believes that during this year's Q4 peak season, VLCC freight rates are expected to hit a three-year high, and performance elasticity is expected to be released. The bank pointed out that on the demand side, oil shipping benefits from the continuous increase in OPEC+ production, while on the supply side, there is limited capacity of vessels awaiting delivery, and the continuous sanctions on Russian and Iranian fleets by the US and Europe have tightened the overall fleet supply. Additionally, the demand will flow towards compliant fleets, leading to an expanding gap between supply and demand. The tense supply and demand situation in the Q4 peak season is expected to be reflected in freight rates, with the possibility of breaking new highs. The bank continues to recommend China Merchants Energy Shipping, COSCO Shipping Energy Transportation, and Nanjing Tanker Corporation. Key points of Zheshang's research report are as follows: Event: On September 11, the VLCC TD3C freight rate reached $74,338 per day, a year-on-year increase of 113%, exceeding the data for the peak season in Q4 of 2023 and 2024. On September 12, the WS freight rate reached 93.6 points, an increase of 7.4% compared to the previous day. We believe that during this year's Q4 peak season, VLCC freight rates are expected to hit a three-year high, and performance elasticity is expected to be released. OPEC+ Continuously Increasing Production as Core Demand Catalyst On September 7, OPEC released a statement that 8 major oil-producing countries within OPEC and non-OPEC have decided to increase production by 137,000 barrels per day in October. Since the beginning of this year, OPEC+ has implemented multiple production increases: announcing a 411,000-barrel per day increase in May in early April, continuing with a 411,000-barrel per day increase in June in early May, announcing a 548,000-barrel per day increase from August in early July, and announcing a 548,000-barrel per day increase from September in early August. In 6 meetings from March 3 to August 3, the cumulative production increase of the 8 "OPEC+" countries such as Saudi Arabia and Russia was 2.193 million barrels per day. As of September, this round of production increases has essentially offset the voluntary production cut of 2.2 million barrels per day announced in November 2023. This round of production increases continues OPEC+'s recent supply policy u-turn to restore 2.2 million barrels of production per day a year early to regain market share. We believe that this move is expected to continue to release incremental cargo volume in the tanker market. US and EU Continue to Strengthen Sanctions on Russian and Iranian Fleets, Continuing to Constrain the Supply Side of Tankers Since the beginning of this year, sanctions on fleets led by the US and the EU have continued to increase. On July 31, the US Treasury and State Department jointly announced the largest round of sanctions on Iran since the implementation of the "maximum pressure" policy in 2018. According to Clarkson Research, as of August 2, 2025, the number of globally sanctioned vessels has risen to 1,636, totaling 64.6 million deadweight tons (4% of global capacity). Among them, the number of oil tankers reached 830, totaling 100 million deadweight tons. Currently, the proportion of sanctioned capacity in the crude oil tanker fleet has reached 17% (higher than the 16% in early July and 10% at the beginning of the year), and the proportion of sanctioned capacity in the petroleum tanker fleet has reached 10% (4% at the beginning of the year). Only 3 VLCCs delivered so far this year, 1 scrapped, significant shortage in new supply As of now, there are a total of 906 VLCCs globally, with 183 over 20 years old, accounting for 20.2%. Since 2025, only 3 VLCCs have been delivered, with 4 to be delivered this year, and one scrapped, maintaining a tight supply situation. Currently, there are a total of 112 VLCC orders, with 30 planned for delivery in 2026 (only 6 in the first half of 2026), 48 planned for delivery in 2027, and 30 planned for delivery in 2028 and beyond. Overall, the tight supply situation for VLCCs is expected to continue until the first half of 2026. Considering the efficiency loss of old vessels, we believe that global capacity growth will remain low. Investment Recommendation With the expanding gap between supply and demand, we believe that freight rates are expected to hit a new high in this cycle. The demand side benefits from OPEC+ continuous production increases, while the supply side is limited by vessels awaiting delivery and the continuous sanctions on Russian and Iranian fleets by the US and Europe, resulting in a tightening of the overall fleet supply. Additionally, the demand will flow towards compliant fleets, further expanding the gap between supply and demand. We believe that the tense supply and demand situation in the Q4 peak season will be clearly reflected in freight rates, with the possibility of breaking new highs. We continue to recommend China Merchants Energy Shipping, COSCO Shipping Energy Transportation, and Nanjing Tanker Corporation. Risk Warning Risk factors include easing geopolitical situations and OPEC's production increase being less than expected.