Caitong: Expectation for increased compliance in converting crude oil demand, sharp rise in geopolitical risks boosting shipowners' bargaining power.

Caitong released a research report stating that since the joint airstrike by the United States and Israel on Iran on February 28, 2026, there have been significant changes in Iran's domestic politics. Referring to the situation of government transition in Venezuela, Iranian crude oil may return to the compliant market faster than expected. Currently, the spot freight rate for VLCCTD3C has exceeded $200,000 per day, and the one-year period charter rate for VLCC is close to $120,000 per day. With the background of increased geopolitical risks in the region due to the US and Israeli airstrikes on Iran, there may be a further increase in the bargaining power of long-term charterers, and it is optimistic about the upward movement of freight rates. Caitong's main points are as follows: Significant changes in Iran's domestic situation, enhanced expectations for compliant transformation in demand In 2025, the global daily average crude oil maritime export volume is about 39.3 million barrels per day, with Iran's daily average crude oil maritime export volume of approximately 1.6 million barrels per day, accounting for about 4.1% of the global daily average crude oil maritime export volume. Since the joint airstrike by the United States and Israel on Iran on February 28, 2026, there have been significant changes in Iran's domestic politics. Referring to the government transition situation in Venezuela, Iran's crude oil may return to the compliant market faster than expected. OPEC+ continues to expand production, favorable for compliant demand, increased geopolitical risks elevate owners' bargaining power After a 3-month seasonal production halt in the first quarter of 2026, OPEC+ held its monthly meeting on March 1, 2026, confirming an increase in production of 206,000 barrels per day in April. This slight increase in production is seen as favorable for compliant oil shipping demand, taking into consideration the potential risk of supply gap. In addition, the spot freight rate for VLCCTD3C has exceeded $200,000 per day, and the one-year period charter rate for VLCC is close to $120,000 per day. With the backdrop of increased geopolitical risks from the airstrikes on Iran by the United States and Israel, the bargaining power of long-term charterers may be further increased, and the possibility of an upward shift in freight rates is expected. Investment recommendation Benefiting from the scale of oil tanker capacity, China Merchants Energy Shipping and COSCO Shipping Energy Transportation have significantly elastic performance. Take VLCC as an example, for every $1,000 increase in TCE, China Merchants Energy Shipping and COSCO Shipping Energy Transportation are estimated to increase annual net profits by 1.1 billion yuan and 950 million yuan respectively. With multiple favorable catalysts such as geopolitical changes, stricter compliance, and long-term charterer control, oil transportation companies are entering a period of performance release opportunity, recommending the core targets China Merchants Energy Shipping (601872.SH) and COSCO Shipping Energy Transportation (600026.SH, 01138). Risk warning Significant decline in crude oil demand, OPEC+ production increase falling short of expectations or turning to production cuts, sanctions not meeting expectations, environmental policies progressing slower than expected, war risks, etc.