What’s Driving the Price of Oil? A Supply-Side Story | Rory Johnston

Jul 21, 2022

Rory Johnston, a well-regarded researcher in global commodities markets, dives into the intricate dynamics of oil pricing. He tackles the effects of geopolitical tensions and refinery issues on market volatility. The conversation explores how past investment shortfalls and COVID-19 have shaped recovery efforts. Johnston delves into the interplay of speculative trading and traditional demand, while offering insights on U.S. shale production and future oil investment prospects. His expertise shines through as he navigates the complexities of today's oil landscape.

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INSIGHT

Refined Product Impact

The current oil market volatility stems from issues in both crude oil and refined products.
Refining bottlenecks and shocks have significantly impacted prices at the pump.

INSIGHT

Crack Spread Volatility

Crack spreads, the difference between refined product value and crude oil cost, have reached historic highs.
This is due to COVID-related refinery closures, reduced Chinese exports, and sanctions on Russian products.

INSIGHT

Pandemic's Impact on Oil

The pandemic accelerated the reckoning in the oil market, impacting US shale production and global inventories.
OPEC's production cuts during COVID prevented a worse supply scenario.

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In Episode 260 of Hidden Forces, Demetri Kofinas speaks with Rory Johnston. Rory is a widely quoted researcher and expert in global commodities markets. His work includes a variety of research and investment projects including his commodity market research platform at Commodity Context Dot Com, as well as both public market portfolio and private equity strategy at Price Street.

This episode is for premium subscribers only and is part of an ongoing series of conversations that I’ve been curating with guests focused on investment themes and opportunities in the commodities complex. The goal of this conversation is to provide you with a more critical look at the supply side story in oil, refined products like gasoline and diesel, and to a lesser degree natural gas, including drivers of end-use demand for these commodities. The demand-side picture is much more difficult to project, as it requires assumptions about growth, monetary policy, and the further implementation of sanctions on Russian energy supplies. These are subjects we explored in recent episodes with Helen Thompson on Energy Geopolitics and Ian Bremmer on how to fight a geopolitical recession and are featured in the related tab on this week’s episode page on our website.

Rory and Demetri also discuss some of the financial data compiled by Rory in his most recent Global Oil Data Deck including calendar spreads and speculative positioning in major crude contracts and how we can use that information to help us anticipate the direction of and volatility in oil prices going forward. For premium subscribers to our super nerd tier, Rory has provided you with an abridged version of his data deck for the month of July which publishes in full on his commodity context substack today.

You can access the full episode and transcript, along with the abridged version of Rory’s Global Oil Data Deck by going directly to the episode page at HiddenForces.io and clicking on "premium extras." All subscribers gain access to our premium feed, which can be easily added to your favorite podcast application.

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Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

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Episode Recorded on 07/14/2022