Rory Johnston: Global Oil Market Shattered - Iran War and Tanker Rate Explosion

I've had Rory Johnston on before, but this conversation felt different. The oil market Rory describes isn't just tight—it's structurally broken in ways we've never seen.

We started with the SPR, and Rory's view is more aggressive than most. "I have a very low theoretical bottom of the SPR relative to a lot of analysts," he told me. "I think functionally the floor is zero barrels." The draws have ended for this tranche, but DOE is soliciting the final 40 million barrels, and Rory expects we'll blow past the 250-260 million barrel level everyone assumes is sacred.

Then we got to what Rory calls "arguably the most interesting thing in the oil market right now." For his entire career, if you got a barrel to tidewater, it was functionally a global market. "Now that's all broken." Shipping a barrel from the Persian Gulf to China used to cost $2-3. Now it's $25-30. Tanker day rates have gone from $100-200k to $1.5 million.

The result? "Rather than having one big global oil market now, we have a dozen Balkanized regional oil markets that have trouble interacting with each other." The North Sea is screaming shortage while West African crude trades at historic discounts—consumers and exporters squeezed simultaneously.

I asked about the WTI-Brent blowout, and Rory dropped a stat that stopped me cold: the spread is wider than when WTI went negative in April 2020. "That's a wild stat." It's not manipulation—it's the cost of shipping injected directly into the differential.

On diesel, Rory was blunt about silver bullets: "You either need to fix the war in Russia and Ukraine or you need to end the Iran war. Neither of those seem especially forthcoming." China could ease things by loosening teapot refinery exports, potentially shaving 30-50% off the $100 crack spread.

His biggest surprise? The "Beijing swing"—China cutting crude imports by 5.4 million barrels a day. "China is the single most important reason that we did not hit $200 a barrel oil."

With midterms ahead, Rory's advice: "Hold on for the ride. This is going to be an exciting month."

Timestamps
00:00:00 - Introduction and Guest Background
00:00:17 - SPR Drawdown and Tank Bottoms
00:02:02 - Global Oil Reserves and China
00:05:13 - Crude Grade Spreads and Shipping
00:12:09 - Tanker Market Crisis Explained
00:16:39 - War Risk Insurance Premiums
00:19:15 - Iraq's Surprising Production Recovery
00:21:44 - WTI-Brent Spread and Manipulation
00:27:44 - White House Efforts to Lower Prices
00:32:08 - Could Oil Hit $200 a Barrel?
00:35:20 - 2026 Oil Glut Outlook
00:38:10 - Product Shortages in Emerging Markets
00:39:56 - Export Bans and Diesel Markets
00:44:22 - Tradable Assets and Spreads
00:49:30 - Biggest Surprises: The Beijing Swing
00:52:34 - Concluding Thoughts