Episode summary
Rory Johnston on Why His $200 Oil Prediction Didn't Turn Out Right | Odd Lots
Odd Lots
· · 32 min · Hosts: Joe Weisenthal, Tracy Alloway · Guests: Rory Johnston
Summary
The episode revisits why Brent crude never reached the $150 to $200-a-barrel levels many analysts expected after the Iran war and Strait of Hormuz disruption. Rory Johnston argues the key reason was not that the supply shock was small, but that the market adapted faster than expected through rerouting, strategic stock releases, and a surprising collapse in Chinese crude imports.
Johnston says the prewar flow through Hormuz was about 20 million barrels a day, and even after rerouting there was still roughly a 13 million barrel-a-day loss of Gulf output. That would normally have forced demand destruction, but China absorbed much of the shock by cutting crude imports by roughly 5 million barrels a day from its prewar average. He says it is still unclear how much of that was true demand destruction versus stock releases, refined-product drawdowns, or other substitutions.
He also says Trump jawboning likely mattered by adding downside volatility and discouraging the kind of speculative melt-up that might otherwise have occurred. Looking ahead, Johnston thinks stock rebuilds and strategic reserves could support demand, but only if the market loosens first; otherwise those restocking flows just retighten supply.
Key takeaways
- Rory Johnston says the Hormuz shock was huge, but rerouting and stockpile use kept Brent below the extreme forecasts.
- Johnston estimates China cut crude imports by roughly 5 million barrels a day, making it the biggest absorber of the supply shock.
- He says the mechanism behind China’s import drop is still unclear, with likely contributions from strategic stocks, refined-product drawdowns, and maybe some demand substitution.
- Johnston argues Trump jawboning helped cap prices by adding volatility and weakening traders’ willingness to chase the rally.
- He expects strategic stock rebuilding to support oil demand over the next year or two, but only if the market first moves into surplus.
Notable quotes
“the total flow through Hormuz prior to the war was roughly 20 million barrels a day”
“we were still down roughly 13 million barrels a day of Gulf oil production excluding Iran that had been forcibly shut in through the duration of this crisis”
“Chinese oil imports, crude oil imports into China, the world's largest crude oil importer, fell by upwards of 5 million barrels a day”
“everyone's bullish but no one's buying”
How the episode opens
Bloomberg Audio Studios. Podcasts, radio, news. — Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wiesenthal. — And I'm Tracy Alloway. — Tracy, recording this June 24th at noon, Brent crude is below $74 a barrel. — I know. It's crazy to look back when the Iran war started. I don't think we ever got above like $120 a barrel on Brent despite this scenario, the closure of the Strait of Hormuz, the thing that oil analysts had talked about as a tail risk event for years and years and years actually happening.
No, it is it is really remarkable. We had two peaks. There was one right at the end of March and then one right at the end of April basically and the closing price right around just a little bit shy of 120 both of those days.
But no, absolutely not like some of the doomsday scenarios at least for now, you know, their crossings are picking up. I guess negotiations are ongoing of some sort. But no, they clearly the doomsday scenarios about how this couldn't even stay closed for a few weeks let alone two or three months did not pan out.
I see a lot of people on Twitter/X making fun of the barrel counters right now. — Yes. — Which I I have a lot of sympathy for barrel counters because I like I like my analysis to be grounded in facts and numbers. But there is clearly a disconnect here between what happened with the price and some of those predictions.
Well, maybe we learned something. Maybe we learned something about the oil market in the last few months. We've gotten a lot of requests for this episode and so we are going to talk to someone that we talked to right at the very beginning of the war.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil market
- brent crude pricing
- strat of hormuz
- iran war
- chinese import reductions
Watch the episode
Watch “Rory Johnston on Why His $200 Oil Prediction Didn't Turn Out Right | 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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