Caitong Securities released a research report stating that current demand is strengthening amid OPEC+ production expansion and tightening sanctions in Europe and the U.S., with freight rates already showing a strong response. While supply-side clearance remains suboptimal, the high proportion of aging vessels indicates significant clearance potential. If gray market demand contracts, the supply side could see a wave of scrapping, providing long-term support for freight rates. Key insights from Caitong Securities are as follows:

**Energy & Chemical Feedstock: Imbalanced Production-Demand Drives West-to-East Oil Trade** Crude oil, a critical energy and chemical feedstock, exhibits stark regional disparities in reserves. The Middle East and North America account for nearly 60% of global production, while demand is concentrated in East Asia, Europe, and the U.S. This imbalance has catalyzed a point-to-point trade pattern of west-to-east oil transportation. The current industry supply structure is fragmented (CR10 at 27.9%), with VLCCs as the primary vessel type offering the highest profit elasticity and contributing the majority of revenue.

**Oil Shipping Cycle Review: Freight Rates and Stock Prices Strongly Correlated** Supply clearance is a prerequisite for major cycles. Since WWII, only two prolonged cycles with sustained momentum have occurred: 1983–1991 and 1999–2004. Both were preceded by significant and sustained supply clearance (driven by natural attrition, pessimistic expectations, or regulations). Tight supply-demand dynamics provided robust support for subsequent freight rate surges, extending cycle vitality.

**OPEC+ Production Hike Boosts Demand, Q4 Peak Season Fuels Freight Rate Rally** In April 2025, OPEC+ began gradual production increases, accelerating the decline in oil prices. Against this backdrop of relatively low prices, refinery utilization rebounded alongside rising floating storage, warming supply-demand relations and driving freight rates sharply higher. As of December 3, 2025, the TD3C route (Middle East-China) TCE hit $121,000/day, up 412.9% month-to-date. With Q4 peak season underway, low oil prices, stricter sanctions, and heightened compliance needs may spur global crude restocking, further pushing freight rates upward.

**Risks:** Sharp decline in crude demand, OPEC+ production hikes falling short or shifting to cuts, weaker-than-expected sanctions enforcement, and geopolitical conflicts.