The cost of securing long-term charters for crude oil supertankers has surged to a record high, driven by massive bets from South Korean shipowners and escalating geopolitical tensions pushing freight rates to extreme levels. According to data from Clarkson Research Services, a subsidiary of the world's largest shipbroker, the average cost to charter a Very Large Crude Carrier (VLCC) for one year has now exceeded $92,000 per day. This is the highest level since records began in 1988. For the newest, most fuel-efficient vessels, daily rates have surpassed $100,000.
It has been reported that the US military has deployed fighter jets, early warning aircraft, and drones in multiple countries including Jordan, Saudi Arabia, Bahrain, and the UAE. Furthermore, US President Trump is reportedly considering a "limited-scale" military strike against Iran to pressure it into accepting US demands regarding the nuclear agreement. Notably, previous reports indicated the US was considering seizing tankers involved with Iranian oil as a pressure tactic.
Research from CITIC Securities suggests that expanded sanctions by Western nations on the "shadow fleet," particularly intensified by the US since the beginning of 2025, have reduced effective shipping capacity in the market. This has pushed up the baseline for freight rates and increased their volatility during peak seasons. Currently, approximately 16% of the VLCC fleet is classified as restricted vessels, with the proportion of Aframax tankers closely linked to Russia reaching as high as 33%.
In 2025, OPEC shifted from its previous production-cutting strategy to increasing output, entering a substantive phase of production growth. Concerns over potential crude oil supply disruptions have prompted China to begin replenishing its inventories. Due to the expanded Western sanctions on the shadow fleet, around 16% of the current VLCC fleet consists of restricted vessels. The value appreciation rate for ten-year-old VLCCs has reached 85%, and the rising value of vessel fleets is boosting stock valuations.
A research report from Guotai Junan Securities stated that since 2026, tense geopolitical situations and highly optimistic shipowner sentiment, coupled with increased chartering activities by overseas shipowners to control market supply, have kept oil tanker freight rates elevated. The VLCC Time Charter Equivalent (TCE) rate for the Middle East-to-China route has remained above $120,000. The report highlights that shipowner sentiment is likely to continue influencing short-term freight rates and recommends monitoring the year-on-year upward trend in the baseline freight rate. The institution forecasts that oil tanker profits for Q1 2026 will surge severalfold compared to the same period last year.
Regarding Hong Kong-listed stocks related to the oil shipping market: COSCO SHIP ENGY (01138): Following years of business restructuring and integration, COSCO SHIP ENGY has established a new pattern of integrated chain operations encompassing oil, gas, chemicals, and storage. Oil shipping remains the company's core business, consistently accounting for over 80% of its revenue in the past decade. International crude oil and refined product transportation are the primary contributors to profit flexibility, while domestic oil shipping and LNG transportation form the stable profit foundation. As of September 2025, calculated based on a unified deadweight tonnage standard, oil tankers, LNG carriers, chemical tankers, and LPG carriers accounted for 83.2%, 16.5%, 0.3%, and 0.1% of the fleet capacity, respectively.