Crazy surge! Oil transportation prices have doubled, driven by multiple positive factors (Related stocks)

Tuesday (March 3rd), Middle East geopolitical tensions escalated. Due to the blockade of the Strait of Hormuz, the A-share shipping and port sector performed strongly, with China COSCO Shipping Development hitting the daily limit, along with multiple stocks like COSCO Shipping Holdings, China Merchants Energy Shipping, and China COSCO Shipping Corporation hitting the daily limit.

According to Cailian Press, on the news front, the Baltic Exchange stated that due to Middle East conflicts, oil tanker freight rates have soared to record levels, with benchmark oil tanker daily earnings reaching $424,000 per day. StealthGas, a US-listed company, CEO Harry Vafias, predicted VLCC daily rental rates could reach $500,000. Compared to the previous rate of $200,000 per day, this represents an increase of 100%-150%.

A research report from China International Capital Corporation (CICC) pointed out that in the short term, due to increased navigation risks in the Persian Gulf region, some ships are changing course, leading to higher geopolitical risk premiums and insurance costs. Meanwhile, oil-importing countries, worried about supply disruptions, may increase procurement from other sources (OPEC or resuming increased production), which is favorable for oil freight rates.

Leverage Funds: Snatching Up These Stocks

Data from Eastmoney Choice shows that since February this year, leveraged funds have been actively buying a batch of shipping port concept stocks. China Merchants Shipping ranked first, with a net financing purchase of 460 million yuan; China Merchants South America ranked second, with a net purchase of 280 million yuan.

Stocks such as China COSCO Shipping Corporation, Beibu Gulf Port, China COSCO Shipping Technology, HNA Technology, China COSCO Shipping Development, and Lianyungang have net financing amounts ranging from 200 million to 20 million yuan.

Institutions: Multiple Factors Favor Oil Freight Rates

CICC stated that multiple factors are positive for oil freight rates. In the short term, increased navigation risks in the Persian Gulf lead some ships to change course, raising geopolitical risk premiums and insurance costs. Additionally, oil-importing countries, fearing supply disruptions, may increase procurement from other sources (OPEC or resuming increased output), which benefits oil freight rates.

Dongxing Securities noted that the Strait of Hormuz is the only route from the Persian Gulf to the Indian Ocean. Its blockade could trigger a rush for oil or ships in the short term, causing oil prices and shipping rates to rise rapidly due to panic. If the security passage issue in the strait cannot be resolved quickly, more serious consequences could ensue. Even if some Saudi and UAE oil can be transported via pipelines bypassing the strait, pipeline capacity is unlikely to fully compensate for the gap caused by Hormuz’s closure. The global energy supply pattern may be forced to undergo restructuring, though the probability of this happening is low. Regardless of the outcome, the escalation of the situation has further fueled short-term panic, and VLCC freight rates are likely to remain quite “crazy” until a more definite easing occurs.

CITIC Construction Investment stated that restrictions on transportation through the Strait of Hormuz will drive adjustments in the crude oil transportation market freight rates (especially for VLCC vessels). On the demand side, after Middle Eastern oil exports are hindered, Asian buyers will shift demand to the Atlantic basin, lengthening voyage routes and occupying more shipping capacity. On the supply side, limited VLCC dispatches in the Persian Gulf, decreased fleet turnover, and increased shipping risks pushing up insurance premiums will influence freight benchmarks.

(Source: Oriental Wealth Research Center)