Episode summary
Rory Johnston Returns (FvF Ep. 207)
Facts vs Feelings
· · 51 min · Hosts: Ryan Detrick, Sonu Varghese · Guests: Rory Johnston
Summary
Rory Johnston argued that the oil market is still in a severe physical deficit even though Strait of Hormuz flows have recovered far more than many expected. Brent is around $108 a barrel, prompt spreads are near $8, and the curve remains extremely backwardated, which he said signals scarcity in the prompt market rather than normal balance. He said roughly 13.5 million barrels a day are now moving through Hormuz versus about 21 million pre-war, but the cost of keeping barrels moving is huge, with Iraqi barrels heavily discounted and tanker rates at record highs.
Johnston said the biggest surprise in the crisis has been China, which he called the “Beijing swing.” He argued China cut net crude imports by about 5.5 million barrels a day through a mix of weaker stock building, strategic draws, and lower refinery runs, while also likely releasing diesel stocks. He said this was not explained by the domestic economy alone and that China’s actions helped offset the supply shock.
On diesel, Johnston said the market is even tighter than crude, with about 2 million barrels a day lost from Middle East, Red Sea, and Russian supply. He said a U.S. diesel export ban could lower U.S. pump prices quickly, but would tighten global markets further. For him, the crisis is truly over only when OECD inventories rise materially and the front of the crude curve flips into contango.
Key takeaways
- Johnston said Brent near $108 with nearly $8 prompt backwardation still implies an acute crude deficit, not a normalized market.
- He argued Hormuz is flowing about 13.5 million barrels a day, but the trade is so costly that Iran has only partially lost leverage, not fully lost control.
- He said China likely reduced net crude imports by about 5.5 million barrels a day, making Beijing the biggest surprise demand-side force in the war.
- Johnston said diesel is tighter than crude, with roughly 2 million barrels a day lost from Middle East, Red Sea, and Russian supply.
- He said a durable crisis ending would show up first in rising OECD inventories and then in the front of the crude curve flipping into contango.
Notable quotes
“Brent, uh, you know, prompt Brent futures are sitting at about $108 a barrel, but this is an extremely tight 100”
“These are extremely backwardated markets which tells us that regardless of everything else we are going to say that at this exact moment we still have an acute kind of gaping deficit in the oil market”
“we have around 13.5 million barrels a day flowing through Hormuz relative to a pre-war normal of around 21 million barrels a day”
“I'm really more of a hormuse half empty kind of guy because if you had told me if you told any oil analyst in January that don't worry guys on day 208 or whatever of the war”
“The thing that was far and away the biggest surprise shock in this crisis, the thing that we didn't I didn't expect was China cutting net crude oil imports by like 5.5 million barrels a day”
How the episode opens
Welcome to the Facts Versus Feelings podcast. I'm your host Brian Dietrich and I'm joined by my co-host Sonar Geese. Cutting through the noise each week with Ryan Dietrich, chief market strategist and Sonovar Geese, chief macro strategist.
Taking out the boring and helping investors focus on what really matters. And the King Returns. Episode 207 of Facts Versus Feelings.
Ryan and Sony here as always. Rory Johnston Returns. We were joking before we uh started a uh what was that?
Lord of the Rings. Son of you know me. I don't know.
Lord.
Lord of the Rings. — Yeah. — Which my son and I are reading. I'm I'm holding up the Fellowship of the Ring book. So — Rory, I don't know if you're a fan, but welcome back. — Absolutely. Yeah, I'm absolutely long longtime fan. I I just read my son The Hobbit, so and he's six, so this is it was his first like real real adultish book, even though it is technically a kids book, but anyways.
Yes. — No, we read that last year and my son's in the ER right now with a breathing issue. So, you'll finish this and I'm back to shuttling with my, you know, exchanging roles with my wife who's waiting for him. But I'm going to take a book and read it in the year or two. So,
Yes. Um, how do you what I mean? So, we haven't really talked about it. You guys went camping and he got a virus. I mean, how is your son? I mean, really, this podcast, this podcast is important, but it's not that important. Tell me he's okay. I mean,
I hope he's okay. I mean, he doesn't have they tested him for he doesn't have RSV.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- brent crude backwardation
- strait of hormuz flows
- china crude import swing
- diesel shortage
- oecd inventories and contango signal
Companies and tickers mentioned
- Carson Group
- Commodity Context
Watch the episode
Watch “Rory Johnston Returns (FvF Ep. 207)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Facts vs Feelings
Facts vs Feelings, this episode and its artwork belong to Carson Investment Research. Octagon is not affiliated with the show; this page is an independent summary.
