Huachuang Securities: Middle East conflict continues, long-term demand logic for the oil transportation market is expected to strengthen continuously.

Huachuang Securities released a research report stating that the Middle East conflict has been ongoing for three weeks, and the market is highly concerned about changes in the oil shipping market. If the conflict quickly de-escalates in the next 1-2 weeks and the passage through the Strait of Hormuz is restored, it will bring about a short-term pulse-demand release. In the medium to long term, if the US and South America increase production by 1.32 million barrels per day, the demand gap caused by the strait closure can be fully offset. In the long-term demand analysis, OPEC+ still has a potential production increase of 3.24 million barrels per day compared to the three rounds of production cuts before, accounting for about 8% of global shipping volume by 2025. With the continued escalation of sanction enforcement and ongoing geopolitical disturbances, the logic of "black oil turning white" may continue to be realized. Huachuang Securities' main points are as follows: Scenario 1: If the conflict quickly de-escalates in the next 1-2 weeks and the passage through the Strait of Hormuz is restored, it will bring about a short-term pulse-demand release. After the passage through the strait returns to normal, oil-producing countries will have the motivation to clear out their storage capacity and resume production as soon as possible, while there may still be delays in shipping capacity and potential risks of port congestion. In the medium term, if Iran's oil shifts to compliant markets, it could bring about a 5% demand increase, while the likelihood of non-compliant Iranian fleets returning to compliant markets is low due to their age and difficulty. Scenario 2: If the passage through the Strait of Hormuz remains disrupted for the long term, how large will the oil shipping demand gap be? The Saudi Arabia East-West oil pipeline and the UAE's Habshan-Fujairah pipeline can collectively offset 56% of the Persian Gulf's oil export turnover. In the short term, if the US and Europe release strategic oil reserves, reaching an export volume of 2.25 million barrels per day, the demand gap can be fully offset. In the medium to long term, if the US and South America increase production by 1.32 million barrels per day, the demand gap caused by the strait closure can be fully offset. [Continued...]