AI Summary
5 min readThe Strait of Hormuz reopened faster than almost anyone expected, but the oil market has not returned to normal. Instead, a strange split has emerged: crude itself is in a mini-glut, while refined products like diesel and gasoline are experiencing near-record tightness. Commodity Context founder Rory Johnston explains that the market’s current behavior is driven by a temporary surge of oil leaving the Middle East, a massive discretionary pullback by China, and a critical bottleneck in global refining capacity—all layered on top of an unresolved geopolitical standoff between the United States and Iran.
The Hormuz Jailbreak and the Loading Lag
After months of closure, the pace of oil flows exiting the Strait of Hormuz has been extraordinary. Johnston reports that on multiple days, outflows exceeded 20 million barrels, surpassing pre-war levels. Combined with maximum utilization of alternative routes like Yanbu and Fujairah, the Middle East has been pushing out roughly 130% of its pre-war supply. This surge has been sustained by drawing down floating storage—oil sitting in tankers within the strait—which Johnston estimates can only continue for another week or two at the current pace.
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What you'll learn
- 1 (03:21) **The Hormuz Jailbreak & The Binding Constraints** - Rory describes the massive surge of oil flows exiting the Strait of Hormuz, exceeding pre-war levels via draws on floating storage, and explains why loadings of fresh crude haven't kept pace.
- 2 (08:01) **Is the War Over or Just on Pause?** - Rory analyzes the current state of the Hormuz conflict, framing it as an unstable cold war where both sides pursue mutually exclusive goals over control of the strait.
- 3 (12:25) **Why the $200 Oil Prediction Was Wrong** - The host and Rory dissect the unexpected failure of oil prices to explode despite a prolonged Hormuz closure, identifying the key factors that balanced the market.
- 4 (15:27) **The Split Petroleum Market: Crude Glut vs. Product Famine** - Rory explains the current market distortion where crude oil is weak and in contango while refined product crack spreads are at or near all-time highs.
- 5 (19:23) **Is the Contango Sustainable or Just a Timing Mismatch?** - The host questions whether the current market weakness is anticipatory of a full recovery or a temporary dislocation from the surge in oil that hasn't been absorbed.
- 6 (24:14) **The Political Problem: Getting Gasoline Prices Down** - Rory addresses the challenge facing the Trump administration in lowering gasoline prices ahead of elections, given the fixed nature of global refining capacity.
- 7 (28:44) **The Mini-Glut Scenario: Can Oil Go to $50?** - The host presents the bear case of a short-term crude glut crashing flat prices, and Rory assesses the likelihood given current positioning and SPR policy.
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Guests on this episode
Show Notes
MacroVoices Erik Townsend & Patrick Ceresna welcome, Rory Johnston. They discuss the Hormuz crisis, China’s role in tempering global oil demand, and the outlook for what comes next as negotiations evolve in the middle east. https://bit.ly/4eIFMaO
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