CITIC Securities: Oil transportation companies' profits are expected to reach new highs by 2026

CITIC Securities research report states that from March 20 to 24, the traffic volume in the Strait of Hormuz was 2/1/5/7/3 vessels (127 vessels on February 27), during which two product oil tankers passed through the strait in the last three days. Some crude oil tankers turned off their AIS signals throughout the process of entering and exiting the strait and the Persian Gulf, resulting in missing positioning data. The strait has shown preliminary signs of “partial recovery of traffic capacity.” According to our previous external report “Logistics and Travel Service Industry Oil Transportation Cycle Weekly Discussion Series - VLCC Concentration Increase Reshaping Freight Rate Mechanism” (2026-03-18), the estimated amount of crude oil rerouted through the ports of Yanbu, Fujairah, and Oman reaches 6-7 million barrels per day. Assuming traffic volume recovers to 40% of pre-conflict levels and considering demand replacement from the Red Sea and the US Gulf, the actual demand gap will continue to shrink to below 10%. Pay attention to the marginal changes in traffic capacity in the Strait of Hormuz; short-term adjustments in supply chain methods will lead to increased shipping distances, and the release of US strategic reserves is expected to drive up TD22 (US Gulf-China) freight rates. Once the traffic capacity in the strait partially recovers, the demand for restocking is also expected to become a catalyst for the upward cycle. Profits for oil transportation companies are expected to hit new highs in 2026.

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Oil Transportation | Discussion on Limited Traffic in the Strait of Hormuz

From March 20 to 24, the traffic volume in the Strait of Hormuz was 2/1/5/7/3 vessels (127 vessels on February 27), during which two product oil tankers passed through the strait in the last three days. Some crude oil tankers turned off their AIS signals throughout the process of entering and exiting the strait and the Persian Gulf, resulting in missing positioning data. The strait has shown preliminary signs of “partial recovery of traffic capacity.” According to our previous external report “Logistics and Travel Service Industry Oil Transportation Cycle Weekly Discussion Series - VLCC Concentration Increase Reshaping Freight Rate Mechanism” (2026-03-18), the estimated amount of crude oil rerouted through the ports of Yanbu, Fujairah, and Oman reaches 6-7 million barrels per day. Assuming traffic volume recovers to 40% of pre-conflict levels and considering demand replacement from the Red Sea and the US Gulf, the actual demand gap will continue to shrink to below 10%. Pay attention to the marginal changes in traffic capacity in the Strait of Hormuz; short-term adjustments in supply chain methods will lead to increased shipping distances, and the release of US strategic reserves is expected to drive up TD22 (US Gulf-China) freight rates. Once the traffic capacity in the strait partially recovers, the demand for restocking is also expected to become a catalyst for the upward cycle. Profits for oil transportation companies are expected to hit new highs in 2026.

▍ Preliminary signs of “partial recovery of traffic capacity” have appeared in the Strait of Hormuz, and Iran has begun to establish a maritime “safe corridor” through Iranian territorial waters, anticipating partial recovery of compliant oil tanker traffic capacity.

According to Kpler data, since March 1, Iranian crude oil exports have accounted for nearly three-quarters of the traffic volume in the Strait of Hormuz. We estimate that Iranian crude oil exports have exceeded 2 million barrels in the past 20 days, higher than the daily average of 1.59 million barrels in 2025. Some crude oil tankers turned off their AIS signals throughout the process of entering and exiting the strait and the Persian Gulf, resulting in missing positioning data. Two product oil tankers passed through the strait in the last three days, with the traffic volume in the Strait of Hormuz from March 20 to 24 being 2/1/5/7/3 vessels (127 vessels on February 27). At the same time, a signal regarding the traffic policy in the strait has emerged. On one hand, the Iranian Foreign Ministry stated that “as long as there is no participation or cooperation in aggressive actions against Iran, and compliance with the safety regulations and measures published by Iran is observed, safe passage through the Strait of Hormuz can be coordinated with the relevant Iranian authorities.”

Additionally, according to reports from Lloyd’s List, multiple governments, including India, Pakistan, Iraq, Malaysia, and China, are reportedly discussing ship transit plans directly with Tehran. Officials from the Islamic Revolutionary Guard Corps have established a preliminary ship registration system for “approved” vessels to pass safely. This safe corridor routes to the north between Iran’s Larak Island and Qeshm Island, completely under Iranian jurisdiction. According to reports from Lloyd’s List, at least nine vessels have left through this route, including the Panamanian-flagged container ship “NEW OYAGER,” which is under the actual control of a Chinese shipowner and has passed through the corridor on March 23, making it the first ship to use this route by a Chinese owner, anticipating partial recovery of compliant oil tanker traffic capacity.

▍ The demand gap caused by limited traffic is expected to be controllable. Assuming the traffic volume in the strait recovers to 40% of pre-conflict levels and considering demand replacement from the Red Sea and the US Gulf, the actual demand gap will continue to shrink to below 10%.

We expect the demand gap for crude oil maritime transportation caused by the blockade to gradually narrow under the background of limited traffic. According to EIA data, the crude oil maritime volume in the Strait of Hormuz is about 14.2 million barrels per day, with 74.6% of the crude oil passing through the Strait of Hormuz heading to Asia. If we assume a recovery of traffic volume to 40% of pre-conflict levels, the corresponding crude oil maritime volume would be 5.7 million barrels per day. According to our previous external report “Logistics and Travel Service Industry Oil Transportation Cycle Weekly Discussion Series - VLCC Concentration Increase Reshaping Freight Rate Mechanism” (2026-03-18), the estimated amount of crude oil rerouted through the ports of Yanbu, Fujairah, and Oman reaches 6-7 million barrels per day. According to news from the US Department of Energy on March 11, the US will gradually release 172 million barrels of strategic crude oil reserves (corresponding to 1.433 million barrels per day) over 120 days. If all of it goes to the Far East, the actual demand gap will continue to shrink to below 10% in this scenario.

▍ In the short term, rerouting and releasing strategic reserves will alleviate the crude oil gap. In the medium term, after restoring stable traffic, the release of restocking demand and the digestion of upstream inventory will create a demand pulse.

From a short-term perspective, the increase in shipping distances due to rerouting can partially offset the crude oil gap caused by the closure of the strait, but the infrastructure at ports like Yanbu is relatively weak, and loading and unloading efficiency is limited, making actual travel distances longer, leading to situations similar to congestion at container ports. Additionally, for countries with low crude oil reserves, the actual purchasing demand is expected to be higher, and the appropriateness of prices may not be the primary consideration. Future attention will still need to be paid to the pace of strategic crude oil reserve releases. From a medium-term perspective, once the Strait of Hormuz restores relatively stable traffic, the crude oil reserves consumed during the closure period will need to be replenished. Upstream oil producers will need to digest the already full crude oil storage tanks to create space for increasing operational rates. At the same time, some countries may further raise crude oil reserve requirements to avoid a repeat of impacts from future geopolitical risk events. This demand is expected to support medium-term demand for oil transportation, pushing VLCC freight rates to maintain a relatively high level.

▍ Risk factors:

Significant increase in VLCC capacity; downstream restocking demand not meeting expectations; geopolitical conflicts exceeding expectations.

▍ Investment strategy.

Preliminary signs of “partial recovery of traffic capacity” have appeared in the Strait of Hormuz, and Iran has begun to establish a maritime “safe corridor” through Iranian territorial waters, anticipating partial recovery of compliant oil tanker traffic capacity. According to our previous external report “Logistics and Travel Service Industry Oil Transportation Cycle Weekly Discussion Series - VLCC Concentration Increase Reshaping Freight Rate Mechanism” (2026-03-18), the estimated amount of crude oil rerouted through the ports of Yanbu, Fujairah, and Oman reaches 6-7 million barrels per day. Assuming traffic volume recovers to 40% of pre-conflict levels and considering demand replacement from the Red Sea and the US Gulf, the actual demand gap will continue to shrink to below 10%. Pay attention to the marginal changes in traffic capacity in the Strait of Hormuz; short-term adjustments in supply chain methods will lead to increased shipping distances, and the release of US strategic reserves is expected to drive up TD22 (US Gulf-China) freight rates. Once the traffic capacity in the strait partially recovers, the demand for restocking is also expected to become a catalyst for the upward cycle.

(Source: Yicai Global)