Caitong: Crude oil's big cycle depends on supply clearing, with the current Q4 peak season catalyzing it.

Caitong released a research report stating that current demand is gradually strengthening against the backdrop of OPEC+ production expansion and tightening sanctions from Europe and the United States, with freight rates already showing a strong response. While the current supply side clearance is not ideal, the high proportion of old vessels indicates a great potential for clearance, and if demand in the gray market shrinks in the future, the supply side may see a wave of dismantling, thereby providing long-term support for freight rates. Caitong's main points are as follows: Energy and chemical raw materials, uneven production and sales distribution catalyze the West-East oil transportation pattern Crude oil, as an important energy and chemical raw material, has a clear regional distribution of reserves, with the Middle East and North America accounting for nearly 60% of production, while demand is mainly concentrated in East Asia and Europe and America, leading to the formation of a point-to-point West-East oil transportation trading pattern. Currently, the industry's supply structure is decentralized (CR10 ratio of 27.9%), with VLCC as the main ship type with the highest profit elasticity, contributing the main source of income. Review of the oil shipping cycle Freight rates are closely related to stock prices, and supply clearance is a prerequisite for the big cycle. Since the end of World War II, there have been two cycles with long-lasting continuity and long periods of prosperity, which are 1983-1991 and 1999-2004. In both cycles, there was a significant and sustained clearance on the supply side (natural clearance or pessimistic expectations, regulatory promotion), and the tight supply-demand relationship provided a more stable support for the subsequent release of freight rate elasticity, thus ensuring the continuity of the cycle's prosperity. OPEC+ production increase boosts demand, Q4 peak season catalyzes freight rate prosperity From April this year, OPEC+ gradually increased production, leading to a decline in oil prices. Against the backdrop of relatively low oil prices, downstream refineries increased their operating rates, coupled with an increase in offshore floating storage, warming supply-demand relationship drove freight rates rapidly higher. As of December 3, 2025, the TD3C route (Middle East to China) TCE reached $12,100 per day, an increase of 412.9% compared to early in the month. Currently in the peak season of Q4, with low oil prices, tightening sanctions, and increased compliance demands, global crude oil inventory may once again drive freight rates higher. Risk warning: Sharp decrease in crude oil demand, OPEC+ production increase falling short of expectations or shifting to production cuts, sanctions landing not meeting expectations, war risks, etc.