Rory Johnston on Why His $200 Oil Prediction Didn't Turn Out Right | Odd Lots

Overview

Odd Lots (Bloomberg) interviews commodity analyst Rory Johnston about why early “doomsday” oil predictions for a potential closure of the Strait of Hormuz didn’t come true—specifically the failure to reach expected $150–$200 Brent levels.

Main points and analysis

Background: the “Hormuz choke point” premise

• Hormuz as a major bottleneck: Approximately 20 million barrels/day flowed through the Strait of Hormuz pre-war.
• Rerouting helped, but not fully:
  • While rerouting reduced some exposure (via Saudi/Emirati pipeline options), Johnston estimates net shut-in volumes were still roughly 13 million barrels/day—about 13% of global supply (excluding Iran).
• Why such high prices were expected:
  • The initial logic was that a supply shock of this magnitude—if offsets failed and demand couldn’t adjust—would push crude markets to demand-destruction pricing, at a historically unprecedented scale.

Why prices didn’t spike to $150–$200: China absorbed the shock

• Central claim: Johnston argues the “missing” price response was driven by China.
• Import contraction:
  • He says China’s crude imports fell by ~5 million barrels/day between the pre-war three-month average and mid-2026 (with June trending similarly).
• Why that mattered:
  • This decline absorbed a large share of the spot-market supply that other Asian buyers might otherwise have competed for.
  • As a result, importers such as Japan, Korea, Taiwan, and Australia allegedly avoided prolonged, worst-case shortages.

Was it demand destruction or stock releases? (uncertainty)

• Data limitations:
  • Johnston notes imperfect visibility because China does not publish official demand or inventory figures.
• Demand-destruction doubts:
  • He argues the implied demand decline appeared extremely large (comparable to COVID-era shocks), yet mobility indicators did not suggest major lockdown-like drops.
  • He also points to regulated retail fuel pricing in China (e.g., Beijing petrol rising far less than global prices), which makes “pure” price-driven demand destruction less convincing.
• Alternative explanation consistent with observations:
  • China may have released inventories, potentially including strategic or hidden stockpiles and/or refined product drawdowns.
  • Johnston adds that crude floating storage tanks did not appear to be drawn down aggressively, leaving the question: where exactly the missing barrels went.

Is China “being a good neighbor” by sharing oil security?

• The hypothesis: Hosts consider whether China reduced imports to relieve pressure on other strained Asian and European buyers.
• Johnston’s view: The idea is plausible in spirit, but evidence is unclear.
  • He suggests China likely has incentives to prevent Asia/Europe demand from collapsing if it wants access to alternate markets.
  • He also notes China has said almost nothing publicly about any altruistic policy.

A speculative “why China did it” debate

• Multiple hypotheses: Johnston floats earlier-discussed ideas (including strategic inventory building / war-anticipation concepts from 2023), but says the motivation remains unclear.
• Less-likely conspiratorial angle:
  • He entertains the possibility that U.S.-China dynamics (including the Trump administration’s broader posture and equipment reallocations tied to Middle East dynamics) may have influenced behavior—though he emphasizes there’s no strong proof.

Impact on market structure: SPRs, contango, and “inventory responding to price”

• SPRs vs commercial inventories:
  • Strategic petroleum reserves (SPRs):
    • Releases act like discretionary supply that can move prices without being new production.
  • Commercial inventories / physical scarcity:
    • These drive marginal pricing; SPRs don’t eliminate the need for eventual market surplus/looseness.
• Johnston’s assessment:
  • He argues the U.S. and other SPRs likely approached operational minimums earlier.
  • The market has since been heavily influenced by releases and stock accessibility.
• Signal from Brent curve:
  • Hosts note prompt Brent moved back toward contango, suggesting the market is again less tight—consistent with reduced import competition and a resumed ability for barrels to exit the Hormuz bottleneck.

Counterfactual: could China have simply imported less because it “doesn’t need” oil?

• Scenario test:
  • Asked to imagine early-March conditions where China drastically reduced imports, Johnston says a ~5 million barrels/day import reduction seems implausible at the time given shock size and market dynamics.
• Critique of “rock bottom inventories = only reason prices spike” framing:
  • Johnston suggests oil markets may have adapted because the starting point was oversupplied, and future balances were also less tight than assumed.

Are SPR rebuilds a bullish demand story?

• Johnston says “yes and no”:
  • Countries likely will refill SPRs over 1–3 years, supporting some baseline demand.
  • However, he doubts it creates a lasting demand boom unless the broader market returns to surplus.
  • Otherwise, countries refill while prices remain pressured and inventories stay low.

Bottom line

Johnston argues the expected Hormuz “price catastrophe” wasn’t mainly a matter of wrong geopolitics, but a forecasting miss about market adaptation—especially China’s large import contraction (possibly via a mix of inventory releases, substitution, and/or rapid refined-product drawdowns).

This prevented prolonged global scarcity and kept prices well below the most extreme predictions—while leaving the key unresolved question: what exactly China did, and when/how it will re-enter as a normal competitor for barrels.

Presenters / contributors

• Joe Wiesenthal (host)
• Tracy Alloway (host)
• Rory Johnston (guest; founder, Commodity Context newsletter)
• Jeff Currie (referenced; analyst)
• Javier Blas (referenced; journalist)
• Carmen Rodriguez (producer, credited)
• Dash O’Bennett (producer, credited)
• Kill Brooks (producer, credited)
• Kevin Lozano (producer, credited)