Rory Johnston: Global Oil Market Shattered - Iran War and Tanker Rate Explosion
The Competent InvestorShow Notes
I've had Rory Johnston on before, but this conversation felt different. The oil market Rory describes isn't just tight—it's structurally broken in ways we've never seen.
We started with the SPR, and Rory's view is more aggressive than most. "I have a very low theoretical bottom of the SPR relative to a lot of analysts," he told me. "I think functionally the floor is zero barrels." The draws have ended for this tranche, but DOE is soliciting the final 40 million barrels, and Rory expects we'll blow past the 250-260 million barrel level everyone assumes is sacred.
Then we got to what Rory calls "arguably the most interesting thing in the oil market right now." For his entire career, if you got a barrel to tidewater, it was functionally a global market. "Now that's all broken." Shipping a barrel from the Persian Gulf to China used to cost $2-3. Now it's $25-30. Tanker day rates have gone from $100-200k to $1.5 million. The result? "Rather than having one big global oil market now, we have a dozen Balkanized regional oil markets that have trouble interacting with each other." The North Sea is screaming shortage while West African crude trades at historic discounts—consumers and exporters squeezed simultaneously.
I asked about the WTI-Brent blowout, and Rory dropped a stat that stopped me cold: the spread is wider than when WTI went negative in April 2020. "That's a wild stat." It's not manipulation—it's the cost of shipping injected directly into the differential. On diesel, Rory was blunt about silver bullets: "You either need to fix the war in Russia and Ukraine or you need to end the Iran war. Neither of those seem especially forthcoming." China could ease things by loosening teapot refinery exports, potentially shaving 30-50% off the $100 crack spread.
His biggest surprise? The "Beijing swing"—China cutting crude imports by 5.4 million barrels a day. "China is the single most important reason that we did not hit $200 a barrel oil."
With midterms ahead, Rory's advice: "Hold on for the ride. This is going to be an exciting month."
Timestamps 00:00:00 - Introduction and Guest Background 00:00:17 - SPR Drawdown and Tank Bottoms 00:02:02 - Global Oil Reserves and China 00:05:13 - Crude Grade Spreads and Shipping 00:12:09 - Tanker Market Crisis Explained 00:16:39 - War Risk Insurance Premiums 00:19:15 - Iraq's Surprising Production Recovery 00:21:44 - WTI-Brent Spread and Manipulation 00:27:44 - White House Efforts to Lower Prices 00:32:08 - Could Oil Hit $200 a Barrel? 00:35:20 - 2026 Oil Glut Outlook 00:38:10 - Product Shortages in Emerging Markets 00:39:56 - Export Bans and Diesel Markets 00:44:22 - Tradable Assets and Spreads 00:49:30 - Biggest Surprises: The Beijing Swing 00:52:34 - Concluding Thoughts
Guest:
Rory Johnston — Commodity Market Research - Specializing in Oil & Gas Rory Johnston is a Toronto-based oil market researcher, the founder of Commodity Context, a lecturer at the University of Toronto’s Munk School of Global Affairs and Public Policy, host of the Oil Ground Up podcast, as well as a Fellow with both the Canadian Global Affairs Institute and the Payne Institute for Public Policy at the Colorado School of Mines.
He is a leading voice on oil market analysis, advising institutional investors, global policy makers, and corporate decision makers. His views are regularly quoted in major international media including the Financial Times, New York Times, Wall Street Journal, Bloomberg News, Reuters, BNN Bloomberg, CBC, and Financial Post, and he frequently appears on numerous market and industry podcasts (e.g., Bloomberg’s Odd Lots, Hidden Forces, etc.).
Prior to founding Commodity Context, Rory led commodity economics research at Scotiabank where he set the bank’s energy and metals price forecasts, advised the bank’s executives and clients, and sat on the bank’s senior credit committee for commodity-exposed sectors. https://www.commoditycontext.com/ https://x.com/Rory_Johnston
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