Jefferies has released a research report stating that the management of COSCO SHIP ENGY (01138) believes the VLCC market is entering a period of structural tightness in 2026, rather than facing a cyclical peak risk. On the demand side, sustained crude oil imports by China, increased exports from the Middle East and the Atlantic Basin, and India's shift to non-Russian compliant crude oil support growth in ton-mile demand. On the supply side, sanctions, vessel aging, and increased floating storage are causing a continued contraction in effective fleet capacity. The firm has raised its 2026 profit forecast for COSCO SHIP ENGY by 11% to reflect higher freight rates, and increased its 2027 profit forecast by 78% to account for crude oil restocking demand and longer ton-miles due to route diversions. Jefferies has raised the target price from HK$10 to HK$24.6 and reaffirmed a "Buy" rating. The report notes that global new vessel orders account for only about 22% of the existing fleet, with new vessel deliveries delayed until 2029. By then, approximately 376 VLCCs will be over 20 years old, while new orders stand at only 195 vessels, implying that new vessels will largely offset scrapping rather than creating an oversupply. As a result, Jefferies expects VLCC freight rates to remain structurally high in 2026. The firm also highlighted that conflicts in the Middle East have imposed significant security restrictions on the Strait of Hormuz, temporarily trapping over 70 VLCCs (about 8% of global VLCC capacity) in the region. Management anticipates that freight rates in 2026 will remain volatile but elevated.