Episode summary
Rory Johnston on How Oil Could Surge to Over $200 a Barrel | Odd Lots
Odd Lots
· · 37 min · Hosts: Joe Weisenthal, Tracy Alloway · Guests: Rory Johnston
Summary
Rory Johnston argues that the key shock in oil is not just the size of the price move, but the physical blockage of flows through the Strait of Hormuz. He says the market had already priced in some Iran risk, but the current disruption is different because it can’t be solved quickly by normal market mechanisms. In his view, the closure creates a supply loss large enough to force demand destruction, with Brent potentially moving to $200 a barrel or more if the shutdown persists.
He says refined products are already reacting faster than crude because refiners in Asia are cutting runs preemptively to avoid running out of feedstock. That is driving extreme moves in jet fuel and other products before the crude market fully feels the inventory drain. Johnston says the longer the disruption lasts, the more the system hardens into a multi-month recovery problem even if flow resumes.
He also criticizes the reluctance to use strategic stockpiles, calling the SPR a tool designed for exactly this kind of shock. At the same time, he warns that ideas like banning exports or heavy-handed domestic controls could create outright shortages in North America rather than just lower prices. In the wider market, he says Russia is emerging as an unexpected beneficiary as buyers turn back to Russian crude.
Key takeaways
- Johnston says the Strait of Hormuz closure is a true physical supply shock, not a normal price spike, and could justify oil above $200 a barrel.
- He says Asian refiners are already cutting run rates because they fear running out of crude feedstock, which is why product prices are moving faster than crude.
- Johnston argues the SPR was built for exactly this kind of event and says delaying releases worsens the shock.
- He warns that an export ban on U.S. oil products could create shortages and force refinery cuts instead of simply lowering pump prices.
- He says Russia is likely to benefit as India and other buyers return to Russian crude amid tighter global supply.
Notable quotes
“The closure of the straight of Hormuz is something that can't really be fixed by markets”
“this is the scenario that you give new analysts in the industry as kind of a thought experiment”
“if the straight remains closed and I think this is the critical part here whether it's the war or whatever”
“the worst thing for a refinery is literally running out of crude feed stock”
“this is the mother of all supply risk. This is the boogeyman for every oil analyst”
How the episode opens
Bloomberg Audio Studios podcasts, radio, news. — Hello and welcome to another episode of the OddLotss podcast. I'm Joe Weisenthal — And I'm Tracy Aloway. — Tracy, did you see that oil is already technically in a bare market? — I did. I did. So, um I think the definition of a bare market is down. Is it 10 or 20%? I can't remember now.
10% is a correction. — That's right. Okay. So, it's down 20% from the high of I think Brent was at something like 120 per barrel. — Almost 120. 11950. — So, yeah, it's coming down. However, it's still up quite a bit from where it was like a week ago.
Oh, yeah. Absolutely. I mean, it's still up 8% from Friday. I mean, that's how crazy the oil market is right now. That — We're at that moment in time where numbers kind of lose meaning. I feel right.
Yes. And obviously, look, we all know the context just extraordinary surge. I think one of the things that's surprising to me or not maybe not surprising but notable to me and we'll get into this with our guest of course in a minute is that Iran war risk was well known.
the price of oil had already been creeping higher a bit even prior to the first attack. So this was already a concern, but it sort of goes to show like how I don't know exactly what the term is, how unexpected or how the degree to which basically this was not priced in. The fact that traders were already very keen and aware that there was a very high possibility of a strike in Iran and yet we've just seen this absolutely massive surge in just the span of, you know, 10 days really.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil prices
- iran war
- strait of hormuz
- commodity market outlook
- gas and fuel costs
Watch the episode
Watch “Rory Johnston on How Oil Could Surge to Over $200 a Barrel | Odd Lots” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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