MacroVoices #515 Rory Johnston: Why Trump is Keeping The Oil Price High
Rory Johnston argues that Trump's oil policies are actually keeping prices higher through sanctions and blockades, contrary to his stated goal of lowering prices. The interview covers Venezuela's oil situation, potential regime change operations, and geopolitical impacts on crude markets.
Summary
In this MacroVoices interview, Rory Johnston from Commodity Context argues that despite President Trump's stated goal of lowering oil prices, his policies are actually having a bullish effect on the market. Johnston contends that Trump's sanctions and blockades on Venezuela, Iran, and Russia have removed approximately 750,000 barrels per day from global supply, preventing what should be a significant oversupply from reaching markets. The discussion covers the recent Venezuela situation, where Trump claims to have seized 30-50 million barrels of oil, though Johnston suggests this is largely oil that was backed up due to Trump's own blockade. The conversation explores the complexities of restoring Venezuelan oil production, with estimates suggesting it would take 3+ years and $50+ billion to add just 1 million barrels per day of new production. Johnston discusses the unusual term structure in oil markets, with repeated patterns of geopolitical shocks preventing expected price declines. The interview also touches on broader geopolitical implications, including potential regime change operations in Iran and Venezuela, and concerns about U.S. territorial ambitions affecting Canada. The hosts conclude with technical analysis suggesting the recent oil price rally may be primarily geopolitical premium that could retrace if tensions ease.
Key Insights
- Johnston argues Trump's sanctions and blockades have removed 750,000 barrels per day from global supply, making him a bullish factor for oil prices despite his stated goal of lowering them
- Venezuela has only 10-15 million barrels of oil readily available off its coast, not the 30-50 million barrels Trump claims to have seized
- Restoring Venezuelan oil production would require 3+ years and $50+ billion in investment to add just 1 million barrels per day, according to industry experts
- The global oil market shows a 3 million barrel per day oversupply on paper, but sanctions are preventing this glut from reaching markets and affecting prices
- Oil markets have shown a repeated monthly pattern where geopolitical shocks prevent expected moves into contango, keeping prices elevated
- Chris Wright announced the U.S. would 'happily partner with Iran on oil if the regime ends', suggesting regime change motivations
- Johnston believes oil prices would be 'much, much lower' if Kamala Harris had won the presidency due to less aggressive sanctions enforcement
- The Kazakhstan CPC pipeline has lost a third of production due to Ukrainian bombing, removing another 1 million barrels per day from markets
- Trump specifically targets $53 per barrel oil as his goal, which Johnston notes is $3 higher than his previous target
- The oil market's term structure shows unusual patterns with abrupt shifts from backwardation to contango at specific future contract dates
- Johnston suggests Trump may be 'winging it' on oil policy without fully understanding how his actions increase rather than decrease prices
- Venezuelan heavy crude doesn't match Strategic Petroleum Reserve specifications, requiring barrel swaps to be useful for refill purposes
Topics
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