MacroVoices #515 Rory Johnston: Why Trump is Keeping The Oil Price High

Episode Summary

Executive Summary: Macro Voices Episode 515 centers on oil geopolitics and market structure. Rory Johnston argues Trump’s sanctions/blockade actions on Venezuela, Iran, Russia, and Kazakhstan are paradoxically bullish for crude by removing barrels from prompt supply. The discussion also covers Venezuela’s production recovery timeline, Iran risk, Greenland/Canada resource politics, and trading implications from the crude curve and short-dated options.

Main Topics: Trump’s oil policy as a bullish force on prices (Priority: 5/5): Rory argues Trump’s stated goal of lower oil prices has been undermined by his own sanctions enforcement and geopolitical actions, which have removed significant barrels from the market and supported prices. Venezuela supply disruption and production recovery (Priority: 5/5): The interview examines how much Venezuelan oil exists, where it is stored, and how long it would take to restore meaningful production. The consensus is that a quick rebound is unrealistic and requires years of investment and infrastructure repair. Iran risk premium and military escalation concerns (Priority: 4/5): The hosts discuss whether Trump’s rhetoric toward Iran signals possible intervention, with the market reacting to a rising geopolitical risk premium and precautionary demand in crude. Sanctions, bottlenecks, and oil-on-water tightening global balances (Priority: 5/5): Rory emphasizes that barrels are being produced but trapped in logistics chains or blocked by sanctions, especially in Venezuela, Russia, Iran, and Kazakhstan, which keeps prompt supply tight despite paper oversupply. Canada, Greenland, and Arctic resource geopolitics (Priority: 3/5): The conversation broadens to Trump’s comments about Greenland and Canada, framing them as part of a broader resource-control and North American geopolitical strategy that concerns Canadian observers. Oil curve structure and trading signals (Priority: 5/5): Rory and Eric focus on unusual WTI curve inflections, recurring monthly yo-yo behavior in front spreads, and the idea that the market repeatedly prices in surplus only to be tightened by fresh shocks. Post-game market outlook and trade setup (Priority: 4/5): Patrick recommends a defined-risk short-dated WTI bull put spread, arguing the mid-to-high $50s remain a soft floor. The post-game also reviews equities, the dollar, gold, copper, uranium, and Treasuries.

Key Arguments: Trump’s actions have been bullish for oil because sanctions and blockades have removed more supply from the market than his rhetoric has added. The oil market looked oversupplied on paper in 2025, but logistical and sanctions bottlenecks prevented that surplus from fully reaching prices. Venezuelan recovery is a multi-year project; even under aggressive investment, restoring 1 million bpd could take roughly 3 to 5+ years from pre-blockade levels. The 30–50 million barrels Trump references are not a durable daily supply source; at best they represent a one-time release or reclassification of trapped barrels. Iran headlines and the Strait of Hormuz remain a low-probability but high-impact risk premium for Brent and the prompt curve. Kazakhstan’s CPC disruptions and Russian sanctions further tighten prompt supply, helping backwardation persist despite longer-term surplus expectations. The WTI curve’s repeated monthly flip from contango to backwardation suggests a recurring headline-driven trading regime rather than a stable fundamental trend. For traders, the current environment favors selling premium or using defined-risk structures rather than making aggressive directional bets on headline-sensitive crude. Using Venezuelan oil to replenish the SPR could be strategically sensible, but the crude quality mismatch means swaps or exchanges would likely be needed. Trump may be acting opportunistically rather than following a coherent long-term strategy, but the market impact is still decisively bullish for crude.

Data Points: Macro Voices episode: 515 - Episode identifier noted in the show intro. Production date: January 15, 2026 - Episode production date stated in the opening. WTI weekly move: up 1,070 basis points to 61.88 - Patrick’s scoreboard for February and March WTI crude contracts. Brent level: 65.40 - Referenced in the post-game as the recent Brent price level. S&P 500 weekly move: up 7 basis points - Macro scoreboard week-over-week. U.S. dollar index: 99.05, up 32 basis points - Dollar retraced above its 50-day moving average. Gold price: 4,635 - February gold contract pressing 52-week highs. Copper price: 605 - March copper contract pressing new highs. U.S. 10-year Treasury yield: 4.14 - Treasury yield cited in the macro scoreboard. Kazakhstan production estimate: ~1.0 million barrels/day - Rory said January output was down from 1.75 million bpd in November due to CPC disruptions. Kazakhstan production prior level: 1.75 million barrels/day - Referenced as the November baseline before losses. Oil-on-water buildup: ~750,000 barrels/day - Q4 2025 buildup across Venezuela, Iran, and Russia-sanctioned flows. Supply glut estimate: upwards of 3 million barrels/day - Paper oversupply in late 2025 that did not fully translate into price collapse. Venezuela oil on water / near coast: 10–15 million barrels - Rory’s estimate of barrels physically off the coast of Venezuela. Potential Venezuelan barrels referenced by Trump: 30–50 million barrels - One-time volumes Trump suggested Venezuela could hand over. Potential near-term Venezuelan recovery: ~300,000 barrels/day in 1–18 months - Rory’s estimate for lower-hanging fruit from existing operations, especially Chevron-linked activity. Longer-term Venezuelan recovery: 3–5+ years for 1 million barrels/day - Timeframe from pre-blockade or pre-recovery levels, with major investment required. SPDR trade level: Sell $59 put / buy $55 put - Patrick’s WTI February 17, 2026 bull put spread recommendation. WTI option credit: $1.55 net credit - Defined-risk premium collected on the spread. Break-even: $57.45 - Expiration break-even on Patrick’s WTI spread. Max loss: $2.45 - Maximum loss if WTI settles at or below $55. Implied probability above break-even: ~62% - Patrick’s assessment using the options market distribution. Probability of max loss zone: ~25% - Chance of WTI finishing through the $55 strike. Gold measured move target: $4,900–$5,100 - Post-game technical target range discussed by Eric and Patrick. Oil target cited by Trump: $53 per barrel - Trump said he wished oil could go back to $53.

Pivotal Quotes: "if the president did nothing, the oil price would be considerably lower today than it is right now" — Rory Johnston: Core thesis that Trump’s sanctions enforcement has been bullish for crude despite his stated desire for lower prices. "Venezuela in its current state is uninvestable" — Exxon representative quoted by Rory Johnston: Illustrates the difficulty of large-scale foreign investment and recovery in Venezuela. "The U.S. would happily partner with Iran on oil if the regime ends" — Chris Wright: Used in the discussion of potential U.S.-Iran policy and regime-change implications.

Implications: The near-term crude market remains headline-driven, with sanctions and geopolitics supporting prompt prices and backwardation. Traders may prefer defined-risk structures and curve trades over outright direction. Long-term, Venezuela and Iran remain massive but slow-moving supply stories.