During the Spring Festival, VLCC freight rates rose more than expected, and overseas oil shipping stocks continued their upward trend; the logic of restricted non-compliant markets for VLCCs and improved supply-demand dynamics in compliant markets continues to be validated.
According to Zhitong Finance APP, Guosheng Securities issued a research report stating that according to Captain Energy, the VLCC TD3C freight rate index increased from WS137.5 on February 13 to WS169.4 on February 20, marking a 23.2% increase. The freight rates continued to rise during the off-season and hit a new high since May 2020. In the short term, the VLCC freight rate rose more than expected during the Spring Festival, indicating a strong performance even in the off-season; in the medium term, with the ongoing dynamics of sanctioned markets such as Venezuela, Iran, and Russia, supply-demand conditions in compliant markets continue to improve, reinforcing the upward cycle logic for the oil shipping sector.
The main viewpoints of Guosheng Securities are as follows:
Unexpected rise in VLCC freight rates during the Spring Festival, overseas oil shipping stocks extend gains
According to Captain Energy, the VLCC TD3C freight rate index rose from WS137.5 on February 13 to WS169.4 on February 20, representing a 23.2% increase. Freight rates continued to climb during the off-season, reaching a new high since May 2020. According to Wind, the respective increases (based on the closing price on February 12) of major overseas oil shipping companies FRO/DHT/Teekay/Scorpio from February 13 to February 20 were 16.94%/13.16%/9.47%/5.74%. FRO and DHT, which primarily operate VLCCs, saw more significant gains, while Scorpio, focused on refined oil transportation, lagged relatively behind.
The logic of restricted non-compliant VLCC markets and improved supply-demand relations in compliant markets continues to be validated.
In 2025, the United States and the European Union tightened sanctions multiple times on crude oil and related tanker assets from countries like Russia and Iran. Coupled with OPEC+ shifting part of its production increase to exports, the supply-demand relationship in compliant VLCC markets significantly improved, leading to stronger freight rates on major routes.
Since January 2026, due to geopolitical conflicts in regions like Venezuela and Iran, the aforementioned logic has been further validated: On one hand, East Asia reduced imports of sanctioned crude oil from Iran and Russia, shifting towards compliant markets such as the Middle East, West Africa, Brazil, and the U.S. Gulf, improving the demand structure for VLCCs—according to Teekay, India’s imports of Russian oil had dropped to 1 million barrels per day by January 2026, with floating storage of Russian and Iranian crude exceeding 300 million barrels at sea. On the other hand, sanctioned VLCCs have become increasingly marginalized. As of February 15, the U.S. had seized nine sanctioned tankers, expanding enforcement from the Caribbean to the Indian Ocean. Currently, there are 154 sanctioned VLCCs, accounting for 17% of existing capacity, with an average vessel age of 21.3 years.
The evolution of current geopolitical conflicts remains uncertain: (1) If sanctions tighten further, importers in East Asia may shift further to compliant market crude, and sanctioned vessels could face a continuous decline in operational efficiency and profitability, benefiting the compliant market; (2) If sanctions are lifted, sanctioned crude would return to compliant markets. Considering factors such as ship age, operational efficiency, and insurance, sanctioned VLCCs might face the possibility of exiting the market, tightening the supply-demand relationship in compliant markets.
Although the proportion of VLCC orders on hand has increased, the core issue of effective supply growth remains the alignment between the retirement of old and black ships and the delivery pace of new ships.
According to VesselsValue and Clarkson, since September 2025, newbuilding orders for VLCCs have accelerated. As of February 2026, the global VLCC orderbook as a percentage of existing capacity has risen to 18.77%. From a static delivery perspective, 30-40 VLCCs are scheduled for delivery in 2026, mainly concentrated in the second half of the year, while recent new orders will be delivered in 2028 or later. However, static delivery does not represent industry effective supply growth. As analyzed earlier, under the impact of restricted sanctioned markets and aging fleets reducing operational efficiency, effective supply in the industry remains tight. Over the long term, attention should focus on the alignment between the retirement of old and black ships and the delivery pace of new ships.
Sinokor’s aggressive acquisition of VLCC assets has increased industry concentration, potentially enhancing freight rate elasticity during the upcycle.
Sinokor, a South Korean shipping company, has increased its presence in the VLCC market through acquisitions and leasing. According to Tech Shipping Planet and Signal Ocean, the company’s share of spot compliant market capacity has now reached 24%. The average age of its fleet is 12.6 years, with approximately 70% of vessels being over 10 years old, which is close to the global VLCC average age of 13.2 years. Unlike container shipping, pricing power in oil shipping mostly lies outside the hands of shipowners. However, factors such as increased concentration of capacity, tight supply-demand dynamics in compliant markets, and fewer new vessel deliveries in the first half of the year could enhance freight rate volatility.
In terms of investment targets
Key focus on China Merchants Energy Shipping (601872.SH) and COSCO Shipping Energy Transportation (600026.SH, 01138). Additionally, keep an eye on China Merchants Nanjing Oil Transportation (601975.SH).
Risk Warning
The exit of the shadow fleet has been slower than expected, crude oil demand has significantly contracted, and a large number of product tankers have shifted into crude oil transportation.
Source: Zhitong Finance
