Morgan Stanley has released a research report indicating that the oil tanker shipping market continues to heat up. The firm has raised its earnings per share forecasts for COSCO SHIP ENGY (01138) for the 2026 to 2028 period by 57%, 74%, and 55% respectively, while lifting the target price from HK$26 to HK$28.4. For China Merchants Energy Shipping (601872.SH), forecasts have been increased by 72%, 95%, and 53%, with the target price adjusted from RMB 25.1 to RMB 27.7. Both stocks have been assigned an "Overweight" rating.

The bank noted that spot time charter equivalent (TCE) rates for Very Large Crude Carriers (VLCC) have reached $800,000 to $1 million per day, which is 20 times the 10-year average. This surge is primarily attributed to reduced effective fleet capacity driven by geopolitical uncertainties, low global crude oil inventories ahead of the winter season prompting charterers to pay premiums to secure oil supplies, and the continuous accumulation of vessel damage during conflicts.

Morgan Stanley expects that, assuming a sustainable Middle East peace agreement, freight rates will first undergo a normalization phase if crude oil and refined product prices decline. However, driven by strong replenishment demand, some conflict-related permanent vessel losses, and potential "compliant" transportation demand for Iranian oil exports, the freight rate rally may continue after a short-term sentiment reset.

The bank believes that current freight rates may be difficult to sustain, but the increasing upside risks to earnings should continue to support investor sentiment.