Zheshang Securities: VLCC freight rates have repeatedly reached new highs, and the peak season for Q4 oil transportation can be expected

Zhitong Finance App learned that Zheshang Securities released a research report saying that on September 11, the VLCC TD3C tariff reached 74,338 US dollars/day, an increase of 113% over the previous year. Exceed the 2023 and 2024 Q4 peak season data. The bank believes that during the Q4 peak season this year, VLCC freight rates are expected to hit a three-year high, and performance flexibility is expected to be unleashed. The bank pointed out that the demand side of oil transportation is benefiting from the continued increase in OPEC+ production. On the one hand, the supply side has limited capacity to be delivered. On the other hand, the US and Europe continue to sanction the Russian-Iraqi fleet, making the overall supply of the fleet tight, and the gap between supply and demand will expand. The tight supply and demand situation during the peak season in Q4 will be evident on the freight side, and the current round of high freight rates is expected to break through new highs. Continued recommendations: China Merchants Shipping (double click) (601872.SH), COSCO Marine (global leader in oil transportation) (600026.SH), China Merchants Nanyou (leading oil transportation leader) (601975.SH).

The main points of the Zheshang Securities Research Report are as follows:

Incident: On September 11, the VLCC TD3C freight rate reached 74,338 US dollars/day, an increase of 113% over the previous year. Exceed the 2023 and 2024 Q4 peak season data. On September 12, the WS fare point was 93.6 points, up 7.4% from the previous day. We believe that during the Q4 peak season this year, VLCC freight rates are expected to hit a three-year high, and performance flexibility is expected to be unleashed.

OPEC+ continues to increase production, becoming the core catalyst for demand

On September 7, OPEC issued a statement saying that eight major OPEC and non-OPEC oil producers decided to increase production by 137,000 b/d in October. Since this year, OPEC+ has implemented several production increase plans: in early April, it was announced that production will increase by 411,000 b/d in May; in early May, it was announced that production will increase by 411,000 b/d in June; in early July, it was announced that production will increase production by 548,000 b/d from August; and in early August, it was announced that production will increase by 548,000 b/d from September. At the 6th meeting from March 3 to August 3, eight “OPEC+” countries, including Saudi Arabia and Russia, increased cumulative production by 2.193 million b/d. As of September, this round of production increases had basically filled the voluntary production reduction of 2.2 million b/d announced in November 2023. This round of production increases continues the major shift in OPEC+'s supply policy in recent months — recovering 2.2 million barrels of daily production a full year ahead of schedule to regain market share. We believe this move is expected to continue to release incremental pallets for the tanker market.

The US and Europe continue to tighten sanctions against the Russian and Iranian fleets, and the supply side of tankers continues to be limited

Since this year, sanctions against fleets led by the US and the European Union have continued to increase. On July 31, the US Treasury Department and the State Department jointly announced that they will implement the largest round of sanctions against Iran since the “extreme pressure” policy in 2018. According to Clarkson research statistics, as of August 2, 2025, the number of sanctioned ships worldwide had risen to 1,636, totaling 64.6 million gross tons (4% of global capacity). Among them, the number of tankers reached 830, totaling 100 million DWT. Currently, the proportion of sanctioned capacity in the crude oil tanker fleet has reached 17% (up from 16% at the beginning of July and 10% at the beginning of the year), and the refined product tanker fleet accounts for 10% of the sanctioned capacity (4% at the beginning of the year).

Since this year, only 3 VLCCs have been delivered, and 1 ship has been scrapped. The supply of new VLCCs is significantly insufficient

Up to now, there are 906 VLCCs worldwide, of which 183 are 20 years old or older, accounting for 20.2%. Since 2025, only 3 VLCCs have been delivered. 4 are to be delivered this year, and 1 ship is being scrapped at the same time. The overall tight supply pattern remains unchanged. Currently, there are a total of 112 VLCC orders, of which 30 are scheduled to be delivered in 2026 (26H1 is only 6), 48 ships are planned to be delivered in 2027, and 30 ships are planned to be delivered in 2028 and beyond. Overall, until the first half of '26, the pattern of tight supply of VLCCs did not change. At the same time, considering the loss in efficiency of old ships, we believe global capacity will maintain a low growth rate.

Investment advice

The scissor gap between supply and demand is widening, and we believe that freight rates are expected to reach a new high in this round of the year. The demand side benefits from the continued increase in OPEC+ production. On the one hand, the supply side has limited capacity to be delivered. On the other hand, the US and Europe continue to sanction the Russian-Iraqi fleet, making the overall fleet supply tight, and demand will flow to compliant fleets, and the scissor gap between supply and demand will widen. We believe that the tight supply and demand relationship during the peak season in Q4 will be evident on the freight side, and the current high freight rate is expected to break through new highs. Continued recommendation: China Merchants Shipping (double click), COSCO Marine (global leader in oil transportation), China Merchants Nanyou (leading oil transportation leader).

Risk Alerts

The geographical situation has eased, OPEC's implementation to increase production has fallen short of expectations, etc.