Management expects 4Q26 VLCC TCE to exceed US$200k/day as oil flows recover and effective vessel capacity remains tight.
AI summary card
Management expects 4Q26 VLCC TCE to exceed US$200k/day as oil flows recover and effective vessel capacity remains tight.
Conference takeaways point to a higher-for-longer VLCC market. China Merchants Energy Shipping management expects at least US$200k/day on the Oman–China TD34 route in 4Q26 and a higher average TCE in 2027 than in 2026.
- 3Q-to-date China VLCC TCE averaged US$136k/day.
- Management said most of its 4Q26 long-haul routes have been locked in around US$200k/day.
- Restocking demand from China and Northeast Asia and active Atlantic trade are supporting tanker demand.
- Rerouting, longer voyages and waiting times are reducing effective VLCC capacity despite expected newbuild deliveries.
Report interpretation
Overview
Goldman Sachs summarizes management comments from its Asia Leaders Conference with China Merchants Energy Shipping. The central message is that VLCC earnings may stay elevated as recovering oil flows and restocking demand meet capacity that is less effective because of rerouting and operational delays.
Core views
Management described the VLCC cycle as bullish and potentially higher for longer. It attributed the recent TCE rally to recovering traffic connected with the Strait of Hormuz, stronger export willingness from Gulf countries, rerouted Yanbu exports, and importers’ restocking demand, including from China. Management expects TD34, the Oman-to-China VLCC route, to achieve at least US$200k/day in 4Q26; Goldman Sachs states this is consistent with its own view. Management also expects average 2027 TCE to exceed the 2026 average as oil seaborne flows continue to recover. Persian Gulf flows remain materially below pre-war conditions but are improving in ways that support tanker demand. Management said roughly 6–7mbpd of crude was carried from inside the Gulf by shuttle tankers with AIS switched off and transferred ship-to-ship outside the Gulf, versus 15mbpd that previously moved through the Strait of Hormuz. Exports rerouted through the East West Pipe and Yanbu Port declined to 2mbpd from 3mbpd before the Houthis’ embargo against Saudi Arabia. Management views that decline as temporary, citing inadequate tanker availability and longer voyages via the Suez Canal, and expects Yanbu flows gradually to recover toward its estimated 3.5–4mbpd maximum capacity. The earnings outlook is supported by both demand and vessel utilization. China VLCC TCE averaged US$136k/day in 3Q-to-date, while management believes it can reach at least US$200k/day in 4Q26 even without a full Hormuz reopening. The company has already locked in the majority of its 4Q26 long-haul-route TCE at around that level. Management cited recovering restocking demand in China and Northeast Asia, active Atlantic activity with US Gulf exports of 5–6mbpd, and tight VLCC availability. Rerouting and geopolitical disruption reduce fleet efficiency, so the effective supply of ships is lower than the physical fleet count suggests. Management also argued that the expected delivery of about 100 VLCCs in 2028 may not translate into equivalent effective capacity. More flows bypassing Hormuz through pipeline routes, longer Yanbu-linked voyages that Goldman Sachs estimates can take 2.5 times as long, and potentially longer Middle East waiting periods can all tie up vessels. It cited waiting times of around one week at the Sidi Kerir terminal, at the Mediterranean end of the Sumed Pipeline. Even if Hormuz reopens, management expects normalization to take several months because port congestion inside the Gulf could persist.
Analysis framework
The report relays management’s conference views and tests the earnings outlook through a supply-demand lens: it compares current and pre-war oil-flow volumes, examines rerouting and voyage duration, and links these factors to VLCC utilization and TCE. It then considers whether future vessel deliveries could be offset by lower operating efficiency and waiting time.
Methodology notes
VLCC supply-demand and effective-capacity analysis
The report connects crude export and restocking flows with available tanker capacity, emphasizing that rerouting, longer voyages and waiting times reduce the fleet’s effective supply.
Oil-flow routing to tanker-rate transmission
It explains how Gulf production exports, pipeline and port routing, and Asian importer restocking influence seaborne volumes, vessel utilization and VLCC TCE.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- China Merchants Energy Shipping Co Ltd (601872.SS)Conference subject and VLCC operator exposed to the projected improvement in long-haul VLCC TCE.
- Strengths
- The company has locked in the majority of 4Q26 long-haul-route TCE at around US$200k/day, according to management.
- Risks
- Rerouting, geopolitical disruption and congestion shape operating conditions and the timing of flow normalization.
Key data
- 3Q-to-date China VLCC TCEUS$136k/dayManagement’s reported average before the expected 4Q26 increase.
- 4Q26 TD34 VLCC TCE outlookAt least US$200k/dayManagement expectation for the Oman-to-China route; the company has locked in most 4Q26 long-haul routes around this level.
- 2027 average TCE outlookHigher than 2026Management expectation supported by recovering oil seaborne flows.
- Crude carried from inside the Gulfc.6–7mbpdVersus 15mbpd pre-war via the Strait of Hormuz.
- Yanbu export flow2mbpdDown from 3mbpd before the Houthis’ embargo against Saudi Arabia; management sees potential recovery to 3.5–4mbpd maximum capacity.
- US Gulf exports5–6mbpdCited as supporting active Atlantic VLCC shipping.
- Expected VLCC deliveries in 2028c.100 VLCCsManagement argues that effective capacity may rise by less because of rerouting and delays.
- Yanbu rerouting voyage time2.5xGoldman Sachs estimate for the longer voyage time.
- Sidi Kerir terminal waiting timeAround one weekExample of congestion-related vessel time loss.
Impact & implications
The report’s implication is that recovering oil trade and restocking can support elevated VLCC charter rates while rerouting and congestion keep effective vessel capacity constrained. Management believes these operational frictions could remain important even as new vessels are delivered and even after Hormuz reopens.
Risks
- Geopolitical risks and rerouting could continue to disrupt tanker operations.
- A reopening of the Strait of Hormuz may still require several months of normalization because of potential port congestion inside the Gulf.
What to watch
- Recovery in traffic through the Strait of Hormuz relative to pre-war flow levels.
- China and Northeast Asia restocking demand and Gulf export willingness.
- Yanbu and East West Pipe export flows, including progress toward the estimated 3.5–4mbpd maximum capacity.
- VLCC TCE realization on 4Q26 long-haul routes and the 2027 average-rate trend.
- The extent to which 2028 VLCC deliveries translate into usable effective capacity.