Rory Johnston argues the oil market is still underpricing a major supply shock from the Middle East, even though prices have not yet reacted as strongly as he expected. He says the lag is being caused by Trump-driven jawboning, slow physical inventory drawdowns, and confusing China data, but his base case remains materially higher oil if the Strait of Hormuz remains closed and shut-in supply does not return quickly.
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This is an interview centered on Rory Johnston’s oil-market view through the lens of Commodity Context, his independent oil research platform. His core thesis is that the market is still too calm relative to the size of the supply shock: roughly 13 million barrels a day of liquids production has been shut in in the Gulf for more than two months, and that missing production should eventually force inventories down and prices sharply higher. He says the reason prices have not yet exploded is not that the shock is fake, but that the market is being distorted by a mix of political intervention, slower physical transmission, and uncertainty around demand, especially in China. A major part of the discussion is the role of Trump’s public commentary. …
Tactically, crude is vulnerable to headline-driven selloffs but biased higher if Hormuz stays shut and inventories keep drawing. The immediate risk is another Trump/diplomacy headline that temporarily breaks momentum before the physical deficit becomes visible.
Over the next several weeks to months, the base case is a delayed but eventually sharper repricing as inventories fall and product tightness becomes undeniable. That view is invalidated if Chinese demand collapses more than expected or if shut-in supply returns faster than the market now assumes.
Structurally, the interview argues that oil remains a geopolitical market where spare capacity, strategic stocks, and product balances can overpower complacent narratives. The broader regime implication is that large Gulf supply disruptions can stay underpriced until physical scarcity forces a sharp adjustment.
The market is underpricing the size and duration of the Gulf oil supply shock.
He says 13 million barrels a day have been shut in for over two months and prices should eventually reflect that.
Trump’s repeated public comments have repeatedly knocked oil lower and distorted normal market hedging behavior.
He argues the market is reacting to repeated posts suggesting the war is ending, then selling off when those claims fail.
Visible inventories have not yet caught up to the physical deficit, so the market still doubts the shortage.
He says physical oil moves slowly and the deficit must appear in stocks before panic sets in.
Tell us about your firm Commodity Context and what services do you offer?
Rory explains that Commodity Context is his independent oil market research platform published on Substack, with advisory services for institutional clients and a data service. They cover oil market physical fundamentals, financialization, positioning, and produce weekly, monthly, and thematic research on Venezuela and Iran.
When we last spoke in March you said WTI could easily go to $200 a barrel. Now it's around $100 and Brent around $110. What's your assessment and why is oil significantly lower than you thought?
Rory says he was alarmed in early March and if asked then whether Hormuz staying closed for two more months would get to $200, he'd say 'well on our way' — but the market has been far more patient. He cites unprecedented verbal interventions and jawboning by the Trump administration (posts on Truth Social causing 10-15 dollar drops), which have short-circuited upside risk accumulation. Additionally, the physical market moves slowly — it takes 6-8 weeks for tankers, so deficits haven't shown in visible inventories yet. US crude inventories are above seasonal norms, masking the scarcity. He estimates about 700 million barrels of expected production have been lost from the Gulf shutdown over two months, which will eventually depress stockpiles.
Do you think the equity market is being complacent about the risks of oil being shut in in the Middle East, or is the market saying it doesn't matter because the US is the world's largest oil producer?
Rory says he's not a broad equity analyst so won't opine on market valuation broadly, but the oil market specifically is not incorporating the degree of supply loss and upside risk. He notes a strong negative relationship between oil prices and non-oil-producing equities. He argues high equity prices are being seen as proof economic consequences aren't severe, but the stock market isn't the economy — consumers will feel the crunch from higher gas prices and feedstock shortages even if tech companies driving equity prices don't.
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