Sinolink: China increases crude oil purchases, and a super peak season for oil shipping is expected in Q4.

Sinolink released a research report stating that the orders on hand are at a historical low, supply rigidity is certain, global inventory restocking provides demand-side support, and the demand increase from emerging Asia-Pacific countries like China and India drives oil transportation demand upward. The restructuring of global oil trade following the U.S.-Iran conflict has significantly lengthened shipping distances, with increased shipments from long-distance regions such as the U.S. Gulf, South America, and West Africa, which is expected to further drive up tonne-mile demand. The bank remains optimistic about the performance cycle in oil transportation and recommends China Merchants Energy Shipping (601872.SH) and COSCO Shipping Energy Transportation (600026.SH), while suggesting to pay attention to Nanjing Tanker Corporation (601975.SH). Sinolink's main viewpoints are as follows: 1. The tense situation in the Middle East and disruptions in the Strait of Hormuz continue to support high oil transportation activity. The geopolitical tensions in the Middle East have disrupted oil transportation cycles once again. On February 28, the U.S.-Iran conflict broke out, seriously disrupting navigation through the Strait of Hormuz. With the rise in risk premiums, the TD3C-TCE level rapidly increased, reaching over $600,000/day as of August 21; however, trading volume for this route is extremely low and cannot reflect the actual earnings of shipowners. VLCC trades are mainly concentrated in the Red Sea, West Africa, and the U.S. Gulf. Currently, amid the U.S.-Iran tug-of-war, the situation of strait blockades is fluctuating, affecting market confidence; coupled with new geopolitical risks emerging in the Red Sea region, the market remains caught in the same logic in the short term: blockade in the strait oil supply tightness + vessels rerouting for safety rising oil transportation prices; therefore, the bank believes that oil transportation will maintain its boom in the short term. The shipping market is driven by freight rates, displaying high prosperity: In July 2026, the one-year charter market for Aframax/Suezmax/VLCC recorded prices up by 0.36%/9.27%/-1.25% month-on-month and up by 65.13%/+117.44%/+145.93% year-on-year, with vessel rental rates standing at historical highs. Since January 2026, the five-year price for VLCCs has exceeded that of new vessels, and from July, the ten-year price for VLCCs has likewise surpassed that of new vessels, resulting in price inversion reflecting the market's strong optimism for the spot market. 2. Demand: Global oil trade restructuring, potential for increased purchases being realized, combined with rising oil production, indicates strong latent demand. The U.S.-Iran conflict in 2026 led to a restructuring of global oil trade routes. The closure of the Strait of Hormuz has caused severe supply interruptions, leading crude oil import demand to gradually shift towards the Atlantic China Welding Consumables, Inc. market. At this point, the U.S. has released emergency crude oil from its strategic reserves and increased production from American countries, supporting sustained strong shipments from the U.S. Gulf; however, since the distance from the U.S. Gulf to Asia is 2.6 times that from the Middle East to Asia, the market's tonne-mile demand has been significantly boosted. China is increasing its crude oil purchases, while OECD countries' inventories are at relatively low levels, gradually realizing the potential for increased purchases. Interruptions in Middle Eastern supply have rapidly decreased stocks in various oil-importing countries. Overall oil consumption remains at normal levels, with stable marginal performance on the demand side. To ensure stability on the consumption side, the demand for crude oil purchases from various countries has entered the realization phase. According to a Bloomberg report on August 20, Rongsheng Petro Chemical and some state-owned refineries have purchased at least 8 million barrels of Iraqi crude oil, requiring prompt delivery; PetroChina, Sinochem, Unipec, and Rongsheng have collectively purchased 10 million barrels of Saudi spot oil; moreover, some Chinese refineries have obtained at least 14 million barrels of September shipment long-term contract quotas, signaling that the demand for increased oil purchases has entered the implementation phase. Sustained increase in oil production may benefit the long term. OPEC+ has lifted 2.2 million barrels per day of production cuts and will partially lift 1.65 million barrels per day of cuts in October-December 2025 and May 2026; the bank calculates that there is still potential space to lift 3.02 million barrels per day of cuts, expected to continue supporting crude oil transportation demand; according to EIA predictions, non-OPEC+ countries will increase production by 800,000 barrels per day by 2026, with Brazil, Guyana, and Argentina leading the production growth, driving an increase in oil transportation tonne-mile demand. 3. Supply: Significant increase in orders on hand, yet the active fleet is aging severely, leading to improved shares for industry leaders. There has been a significant increase in orders on hand. Due to vessels rerouting amid the Red Sea crisis causing tight capacity and catalyzed by the previous peak season, new orders for Q1-Q2 2024 and Q4-2025 to Q1-2026 have seen concentrated signing, boosting current orders for VLCCs, Suezmax, and Aframax vessels to account for 32.6%/29.1%/7.4% of their respective capacities, which are at relatively high levels in recent years. Limited by tight shipyard capacity and delayed schedules, deliveries are expected to concentrate between 2027 and 2029. As of August 2026, the current ratio of orders on hand to capacity for the tanker fleet is 25.21%, down 0.06 percentage points from the previous month, remaining at a historical high since 2015. Currently, there is a severe aging problem for oil tankers. Vessels over 20 years old account for 23.11% of crude oil tankers and 20.80% of VLCCs, resulting in significant operating pressure; the next few years will see an accelerated aging of ships delivered between 2009 and 2012, exacerbating scrapping pressures. The recent rapid increase in orders on hand may help alleviate this potential threat. The oligopoly control combined with increased sanctions has intensified supply tensions. The top ten VLCC shipowners in the world collectively control 404 vessels, accounting for 42% of the global fleet size, leading to unprecedented industry concentration, resulting in artificial supply lock-up and raising the profit center for freight rates; the proportion of sanctioned oil tankers has rapidly increased, while shadow/sanctioned fleets are less efficient, leading to potential supply reductions. Risk warnings: geopolitical risks, risks related to major power relations, risks of market demand downturn or supply-demand imbalance.