According to a research report, since entering August, VLCC freight rates have continued to rise due to OPEC+ ongoing production increases, US tariff additions citing India's imports of Russian oil, and short-term cargo market influences. Using the CT1 route in the CTFI index (Persian Gulf (Ras Tanura, Saudi Arabia) to Ningbo, China) as reference, freight rates recovered from less than $20,000 per day at the end of July to $47,100 per day (eco speed) on August 22nd. The crude oil transportation market, especially the VLCC market, has relatively rigid supply. Compliant market demand faces marginal benefits amid OPEC+ accelerating production increases and the US continuously strengthening sanctions against Iranian and Russian crude oil. With the industry entering its traditional peak season in the fourth quarter, freight rate levels are expected to rise.

**Significant Performance Gap Between Overseas and A-Share Oil Shipping Stocks Since April 3rd Tariff Increases**

Since the US announced additional tariffs on China on April 3rd, 2025, US oil shipping stocks have gradually emerged from the negative feedback sentiment of "global economic recession - crude oil demand decline - transportation demand decline." Major oil shipping companies including TEEKAY, SCORPIO TANKERS, Frontline, DHT Holdings, and INTERNATIONAL SEAWAYS achieved stock returns of 47.46%, 45.12%, 44.90%, 20.39%, and 46.42% respectively from April 3rd to August 22nd. During the same period, A-share companies COSCO SHIP ENGY and China Merchants Shipping recorded returns of 0.23% and 4.68% respectively, with A-share oil shipping stocks significantly underperforming overseas counterparts. The performance gap likely reflects different expectations between US and A-share investors regarding the oil shipping industry.

**VLCC Freight Rates Continue Rising During August Low Season**

From mid-January to May 2025, VLCC freight rates maintained relatively high levels, with April rates breaking through $50,000 per day, showing resilience during the traditionally quiet season. Starting June 13th, due to Iran-Israel conflict impacts, shipping risks in the Middle East increased, and shipowner psychological expectations further supported rates, with VLCC freight rates rapidly rising from $18,400 per day on the 13th to $72,200 per day on June 24th. Subsequently, as the Iran-Israel conflict ended, market sentiment cooled and rates continuously declined. However, entering August, VLCC freight rates have continued recovering due to OPEC+ ongoing production increases, US tariff additions citing India's Russian oil imports, and short-term cargo market influences. Using the CT1 route in the CTFI index (Persian Gulf (Ras Tanura, Saudi Arabia) to Ningbo, China) as reference, freight rates recovered from less than $20,000 per day at the end of July to $47,100 per day (eco speed) on August 22nd.

**OPEC+ Continuous Production Increases Benefit Compliant Market Crude Oil Demand**

The crude oil transportation market has rigid supply, with rate elasticity coming from demand. OPEC+ reached a decision on December 5th, 2024, to gradually and flexibly cancel the voluntary production cut of 2.2 million barrels per day starting April 1st, 2025. Looking at monthly production decisions in 2025, OPEC+ has accelerated production increases, from 138,000 barrels per day in April, to 411,000 barrels per day in May-July, and then to 548,000 barrels per day in August and 547,000 barrels per day in September. OPEC+ member countries' crude oil production increases help drive compliant market VLCC demand. Future attention should focus on the extent to which OPEC+ production increases shift toward exports after the Middle East summer oil consumption peak ends.

**US Continues Strengthening Iran-Related Crude Oil Sanctions Involving Chinese Entities, Benefiting Compliant Market**

The US has implemented multiple rounds of escalating sanctions against Iran and Russia in recent years. According to the OFAC website, on August 21st, the US further added Iranian crude oil-related entities and vessels to the SDN list, including 8 tankers, 1 individual, and 13 shipping entities. US strengthening of sanctions against Iran and Russia involving Chinese entities is expected to impact Iranian crude oil exports and shadow fleet demand when sanctions are substantively implemented. Far East transportation demand may shift toward compliant markets in the Middle East and West Africa, benefiting VLCC compliant market demand.

**Investment Targets**

According to Wind consensus expectations as of August 22nd, COSCO SHIP ENGY A-shares correspond to a 2025 valuation of 10.16x PE, while China Merchants Shipping corresponds to a 2025 valuation of 8.66x PE. Investors may consider COSCO SHIP ENGY (600026.SH, 01138) and China Merchants Shipping (601872.SH).

**Risk Warnings**

Significant decline in crude oil demand, OPEC+ production increases falling short of expectations, sanctions implementation falling short of expectations.