AI Summary
5 min readIn early March 2026, when the Strait of Hormuz was shut by the Iran war, the consensus among oil analysts was clear: Brent crude was heading to $150 or even $200 a barrel. The Strait carries roughly 20 million barrels a day, and even after accounting for rerouting pipelines, the market was losing about 13 million barrels a day of Gulf production. That is 13 percent of global supply. The logic was simple: a shock that large would require demand destruction at prices never seen before. By late June, Brent was below $74. The doomsday scenario did not materialize. Rory Johnston, founder of Commodity Context, came back on Odd Lots to explain why his own prediction was wrong, and what the oil market actually learned.
The China Variable
The single biggest factor that prevented a price spike was China. Johnston estimates that Chinese crude oil imports fell by roughly 5 million barrels a day between the three-month average before the war and June. That is roughly half of the total spot market supply hit to Asia. The effect was that other Asian importers—South Korea, Japan, Australia, Taiwan—faced far less competition for available barrels. By May and June, their imports had recovered to pre-war levels. China had absorbed the shock.
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What you'll learn
- 1 (01:47) **Introduction: The Oil Prediction That Didn't Pan Out** - Hosts Tracy Alloway and Joe Weisenthal set up the episode: Brent crude is below $74 despite the Strait of Hormuz closure, a tail-risk event that actually happened, yet prices never hit the predicted $150-$200.
- 2 (03:46) **The Original Prediction: Why $200 Seemed Reasonable** - Rory recaps the pre-war consensus: the Strait of Hormuz is the ultimate choke point, and a closure would cause a massive supply shock.
- 3 (05:56) **The Two Biggest Reasons Prices Didn't Spike** - Rory identifies the two key factors that prevented the predicted price surge.
- 4 (07:25) **The China Mystery: Demand Destruction or Stockpile Release?** - Rory dives into the puzzle of how China reduced imports by 5 million bpd without visible demand destruction.
- 5 (13:54) **Why Did China Do It? Geopolitical Theories** - Rory explores the possible motivations behind China's massive import reduction.
- 6 (20:40) **The Role of Strategic Petroleum Reserves (SPRs)** - The discussion turns to the limits of inventory releases as a buffer against supply shocks.
- 7 (25:02) **Self-Criticism: The Counterfactual Question** - Rory plays along with a hypothetical: what if he had been asked in early March whether China could simply reduce imports by 5 million bpd?
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Guests on this episode
Show Notes
The Strait of Hormuz has (mostly) re-opened! Crude prices are still up since the start of the war with Iran, but popular predictions earlier this year of $200-a-barrel Brent didn’t pan out. Why is that? We last talked to Rory Johnston, the founder of the Commodity Context newsletter, at the start of the conflict. And in that conversation he said that the Strait’s closure would lead to $200 oil if it persisted for any length of time. Today, he returns to tell us what he’s learned about the oil market since then. He explains the various factors that kept a lid on prices, including some re-routing, Trump jawboning, and (crucially) surprise import reductions from China.
Previous: Rory Johnston on How Oil Could Surge to Over $200 a Barrel
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