Rory Johnston Returns (FvF Ep. 207)

Ryan Detrick and Sonu Varghese of Carson Group are joined again by Rory Johnston of Commodity Context to discuss an oil market they describe as historically tight more than 200 days into the war with Iran. Johnston walks through Brent near $108 with steep backwardation, Hormuz flows of roughly 13.5 million barrels a day versus a pre-war 21 million, China's roughly 5.5 million barrel a day cut to net crude imports, and record-high diesel prices. The episode closes on the signals he watches for the crisis ending, including rising OECD inventories and the front of the crude curve flipping into contango.

1. Brent is near $108 with prompt spreads close to $8 a barrel, which Johnston reads as an acute physical deficit even after Hormuz flows recovered to about 13.5 million barrels a day.
2. China cut net crude imports by roughly 5.5 million barrels a day, which he attributes partly to drawdowns of strategic crude and diesel stockpiles rather than only weak demand.
3. Diesel is described as the tightest part of the market, with about 2 million barrels a day lost from the Middle East and Russia and U.S. exports up roughly 50%.
4. He says a U.S. diesel export ban would lower domestic prices but push global diesel prices sharply higher, and he expects rationing of export licenses instead of a full ban.