YouSaid · the spoken record

Rory Johnston

lines on the record: 119
first: 2022-09-29
most recent: 2022-09-29
sittings or episodes: 1
sources: podcast

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“Yeah, and again, I think that's the section that I just don't have the same kind of tactical side in. So I don't know the exact number, but I do know it's just become more expensive generally to kind of operate in these trades. And what you've also seen, you've seen similar things in European gas and power markets where we've reached the stage where the kind of people just kind of say, oh, the classical France, it's just a number. Like the price is just a number now. There's not much information in it.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, right? Or particularly at a moment where it's like if you short crude at over $100, that's a great position for your company to be in. But it's also really expensive to maintain that short. And I think that's part of this challenge is borrowing costs.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Or less, right? I think it's like, and again, I don't have a good read on the exact tactical side of it, but I think it is like considerably down. And I think that's just visible in the kind of draining. And it's not just on the kind of speculative side. It's not just the traders. It's the commercial side as well. Like oil companies are reducing their exposure to the market.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Yes, just on that margin requirement. So a trading house had $300 million worth of cash to play with back in the day. They might be able to get exposure. $600 million worth of crude. So there's just much”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Powder to use because they have less effective leverage that they have access to. I think that's really part of what's driving this. And it's definitely right that the open interest in all crude contracts is down immensely. And it is one of these crazy things that, you know, In some ways, you always hear that volatility is a trader's friend. But at the other side, you need to be able to afford the positions and you need to be able to actually purchase them. I think that's the kind of side that's really suffering right now.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“When you look at it, what we've seen is this really started to happen at the beginning of the year around the point of the Russian invasion. And when you saw that initial, I mean, and though that initial level of volatility was truly, truly crazy. You jumped up as almost as high. I think on an intraday basis, you almost hit that kind of 2008 high on a nominal basis for Brent like $140 or something like that. And then we're all having very, very quickly. This volatility, particularly with everything else that was going on in the market, really ratcheted up margin requirements and generally it just became less and less affordable for these companies to express a view through these futures and options. And if they were expressing a view much less able to lever that view up. So even if you could, I mean, and I need to do more research on this. I don't know the exact specifics, but you could have a scenario where you still have the exact same participants in the market, but they have less kind of effect.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“You just said it was very volatile, and that triggered something to me. Yes, it's very volatile, but also liquidity is extremely poor. I've talked to a lot of oil traders, a lot of oil options traders saying I've been in this business 20 years. I've never seen liquidity this poor. No one wants to buy or sell oil futures, oil options. Why is that the case? Do you have any insight into that?”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“of oil and coal and what's happening with Fed policy and the dollar and everything else like there's no way right now so I think everyone is you know I think it adds fundamental kind of credence to the level of volatility at the very least”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And I think that the, and it makes sense because, again, obviously there's a huge demand for anything that can produce electricity. And right now, given what's happened in China broadly in the kind of lockdown economy, but specifically to the real estate sector, not a huge demand for steel right now. So I think that's the other thing is like all of these traditional relationships have all gone completely out the window. I mean, more happens, I was saying this to someone the other day, more happens in a week right now than used to happen in like an entire year back when I was at Scotia Bank covering oil. Like you had so much more time to really analyze and obsess about little details about these kind of like reasonably niche topics. Now it's like every major line item in your supply demand balance is basically blown up. You need to try and figure out how to put the pieces back together. So it's just a truly, truly bizarre mark. Oh, you're trying to piece together the new.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“I didn't see that number, but it actually makes complete sense because normally, I mean, normally we're talking at like $50 thermal coal and like $150 metallurgical coal. Like that would be a kind of I heard it from Doomberg.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Wow. And I also heard that there are two types of coal, metallurgical coal used to make steel industrial production and then thermal coal used to heat your home and generate electricity. Normally, metallurgical coal trades at a huge premium. It's much more pure type of coal, whereas thermal coal is much more impure. But because the economy is slowing so much, the demand for metallurgical coal is down and the demand for thermal coal for electricity is up so much. I actually think a thermal coal, I heard, I don't know if this is true, but correct me if I'm wrong, thermocal is more expensive than metallurgical coal, which is crazy.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Have gone completely out the window on a crude oil basis, I think natural gas in Europe hit something like $300 plus a barrel if you're pricing it on an energy coolant basis. So that's why it becomes so obviously very attractive if you have a choice of either putting natural gas into your facility or running it on diesel. Well, right now, diesel is much cheaper, even though diesel is probably the most expensive part of the oil complex. It's still cheaper than gas.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and my good friend Mason Hamilton actually posted a chart on Twitter the other day that it was just shocking to see that so all energy at the end of the day can effectively be converted to a heat content, right? How much energy physically do you get out of it if you set it on fire? Normally coal is at the very, very bottom of that kind of pyramid, which is it's reasonably energy or low energy density in the scheme of things and definitely cheap on a kind of a relative basis. So this chart I was talking about showed that on an energy equivalent basis coal out of Newcastle in Australia is now more richly priced on an energy equivalence basis than crude oil, which normally trades it on like four or five times the relative energy content value. So you have seen this just absolutely all of the traditional relationships.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“And yeah, so under normal times crude oil is rarely used to produce electricity. It's mostly natural gas or coal or renewables like wind and solar or nuclear. But this would be a switching. It's sort of a crisis time. It's like, yeah, we'll burn whatever we have. We'll burn the wood. Let's saw off a leg of a chair to keep ourselves warm. And that's why you're also seeing a huge sort of bull market in coal as well, right?”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“This is really, really hit the gasoline market much more than anything else. Whereas the diesel and jet fuel market still have some of the industrial uses that are supporting them and I think still also is especially Russia tilted. And on top of that, you have this additional worry now going into winter that there's going to be a lot of so-called or gas-to-il switching in Europe where people are, you know, if they can, they're going to run a diesel generator rather than heat their home with gas or whatever, which is going to further most of those generators run on metal distillates like diesel, gas oil, and jet fuel.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“I mean, this is one of these things, right? Is that the benefit of having an all-time high crack spread on top of a nearly all-time high oil price is that really anything is going to be lower than that. And what we had coming forward for the last 90 days is not only oil prices have been kind of tanking over that period, but the crack spread had it as well. Diesel and jet fuel have remained a bit higher, still I would say at crisis levels, whereas in Europe and Asia in particular, the implied gasoline cracks would actually drop to negative levels. And that was because, again, people had been producing more gasoline to kind of chase into driving season, but also there was just a lot less driving going on. You've seen it, there's lower kind of miles driven in the United States. Obviously, China has been locking down hundreds of millions of people and they have not been driving around either.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“And so, Rory, so gasoline, which is refined from crude oil, that is one of the most key inputs to American inflation, particularly in the mind of the American consumer, because they fill up their car so often, whereas they only make a tuition bill or something every quarter or something. But as the Biden administration, Rory, is very quick to remind us, isn't it true that the price of gas has been declining for like 90 days in a row? So isn't the crisis over?”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Normally, that, yeah, exactly gasoline, diesel, whatever. Normally that crack spread, and you can kind of blend it a couple different ways. But on a three-to-one basis, which is kind of some gasoline, some diesel, whatever, that's normally in the kind of $10 to $20 range. And it's been really, it's generally pretty boring. During the height of, you know, in through May and June when the SPR was like, this is how I was going to fix this, that was at like $70. Like three and a half times what you would consider normal. And that was one of these things that even as oil was really, really high, consumers were absolutely getting brutalized by these extremely, extremely high prices, which all at the same time was further exacerbated by a strong US dollar, speaking as someone in Canada that doesn't that additionally got the currency hit on top of it.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, like, you know, you went from normal crack spreads, which is the difference between crack spread or it's like a refining margin, the difference between a barrel of oil and the products that gasoline.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. Now, the US was actually importing not a lot of crude, but was importing a lot of these kind of residual fuels, things like vacuum gas oil and these kind of unfinished, what we call unfinished oil products. And that has actually had an interesting effect, the way this came into effect the market was that it actually reduced the effective kind of production and yield in North American refineries that had been taking that crude, you reduced the kind of yield of things like diesel, which obviously that was further to the crisis that we were facing on top of oil and gas. We've also this once in, I mean, the worst kind of refining crisis that I'm aware of in history.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. Yes. And there is this growing LNG trade. So like you are having more of a kind of an oceanic spot market kind of develop. But in terms of the scale, it's just nowhere near the same scale as the pipe gas, right? I mean, it's just because it's so much more physically kind of convenient to send through a pipeline. It's almost like a power line, right? It's just, you know, you just shoot it through that and that's just the easiest way to get it from point A to point B without all of the expensive kind of chemistry that's required for the LNG side. Now on the oil side you did see some countries in the kind of first month actually outright banned the import of most notably”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“So we say energy, but natural gas and oil are completely different markets. Oil you can put on a tanker, you can ship it from Russia to the bottom tip of Argentina, and it's going to cost money to ship, but you can ship it, whereas natural gas, it's a gas and it has to flow in a specific pipeline that takes years to build. And Nord Stream 1 and then Nord Stream 2. And you can liquefy it and then regasify it and ship it on a ship, but that is extremely costly. And the reason it's costly is because it's dangerous. So you have to spend a lot of money to make sure that the ship doesn't blow up.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Commercial kind of golden goose for Moscow. When Putin kind of really flexed and used the energy weapon, it's very much a double-edged sword. It obviously has been painful for Europe, but now Europe has been moved into overdrive on various energy transition kind of projects, on trying to source new LNG imports from a whole bunch of other areas. Generally, Russia Russia isn't sending that gas anywhere else. Russian gas production is also collapsing because they don't have any.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“I'd say half right. I think the definitely on natural gas. That is 100% something that Moscow has been ratcheting back on its own, trying to build pressure. I think there's an open question of like it's a very painful for Europe now, obviously. We can all see kind of guaranteed recession it's going to cause. In the balance of scheme, taking away the acuteness of this winter The export is more important to Russia than the import is to Europe because Russia really, that was the best customer. It was a high value market. It was fairly captive. It was a huge amount of kind of income that had been built up for decades and decades this industry. It was built up during the Cold War. Like things that were theoretically the stakes were often much higher Moscow very purposely did not mess with the gas flow because they knew that was a”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“To its shareholders and to the investing public, so it will by its own will get out of Russia, but they weren't compelled to by law. So is it accurate to say, Rory, that to the degree that Russian crude Russian natural gas, that flow has diminished going into Europe, it is because Russia made that decision. Russia was holding the card, not the West. Is that accurate to say, or am I wrong?”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Sorori, I'm going to say my understanding of it and correct me if I'm wrong. Okay. When the war first started, the EU and the US imposed sanctions on Russia and the Russian ruble tanked, the Russian stock market, if you're in the US, it just went from a certain level to zero because it was not, you couldn't trade it. It was just like delisted. And it looked like the West had a lot of economic power, right? And the thing was if Russia stops exporting natural gas and oil to the West, it will be because we, the West, the EU, Germany, the US, make that decision because we're the ones holding the cards. But is it accurate to say, Roy, that there have been no government sanctions on Russian energy from the West? And there have been self-sanctions where a bank doesn't want to look bad.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, which Latvian blood and Latvia, as anyone really knows, is not a big crude producer. So that's, you know, pretty surprising. So I think that's the challenge.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. Ship ship transfers. There's, you know, for a long time there was blending. So as long as the barrel wasn't more than 50.1% Russian, it wasn't considered a Russian barrel.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And I think on, so imagine doing that, but on top of needing to track it, which is already hard enough, then you need to validate the accounting. Like that's absolutely...”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Venezuela, too. It's very hard. To oil, it doesn't have a tracker. It's not like, you know, you can't put like a tracker idea in it, like you put it in a dog, you know, or it's like it's soil. Exactly.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“You have Iranian exports that are always still getting around sanctions. And that's on blanket across the board bans very, very well.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Which is the one that I think everyone kind of pushes first and foremost as this kind of like, yeah, Moscow's bad, let's take their money away. It's very politically popular. On the other side, it's just this very pragmatic view that if we do this, that short circuits some of the very obvious kind of bottlenecking that will occur from this EU embargo. You would still allow barrels to kind of be transit through. And I think that in public, the focus is always kind of being pressed on stopping money from going to Moscow. Whereas I think behind closed doors, and I think the subtext is much more, you know, this is important so that we don't blow up the oil market in the interim. So I think there's going to be this open question as to whether, you know, whether it comes to effect, how effective it's going to be. It doesn't seem like it's going to be that effective, at least in its current kind of permutation. Recall that”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“My thinking on the price cap has evolved considerably over the past couple months. I actually proposed something very similar kind of tongue in cheek in like early March. Basically said like, what if we all just got together? And they said, Russia can still sell crude, but give it to us for cheap, and we'll basically flip the arbitrage value to Ukraine to defend itself. And that's actually in some ways actually what they're kind of proposing now. The challenge is that the way they're doing it, I do not think it's even meant to be that effective. I think Washington was always concerned about how hard the clampdown Europe was kind of embarking upon on Russian oil and worried about the kind of price blowblacks, worried about the kind of contribution to inflationary pressure in the world we're facing. So I think there's this thought that like, sure, there's always a dual purpose to a dual stayed purpose to the price cap. One was reducing Russian income.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Economy that's become as convoluted and kind of interconnected as Russia and Europe. So what we expect will happen on December 5th is as of right now it's supposed to be a pretty sudden stop and then you're going to see some kind of rerouting hopefully for Russia to other buyers predominantly kind of chime in India. Now this is where we get into this topic of the price cap debate and Secretary Yellen in particular have been pushing for this idea of a price cap.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“And right, Russian company, the largest private company in Russia, it was hit by kind of the self-sanctioning activity. So all the banks, even though it wasn't explicitly listed as a sanctions kind of target, all the banks pulled back lines of credit. So the only way that the refinery could get oil was by taking crude directly from its parent company in Russia. So now if you do cut off that lifeline of crude from luke oil without any kind of subsequent offset to either ownership of the refinery or to the lines of credit, well, this refinery is going to close. And again, it's the largest refinery in Italy in the middle of still an ongoing refinery capacity crisis, which is happening on top of all of the crude oil crisis that we're talking about. So it's a really, really bad scenario. I think a great example of the kind of unintended consequences of this kind of sanctions, these sanctions regimes in kind of an energy.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Still have a lot of crude and a lot of products going to Europe. As a great example, there's actually a refinery that's like a major piece of kind of policy debate right now in southern Italy. It's the largest refinery in Italy that's actually owned by Luke Oil.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“To the EU sanctions, what you have seen is a lot of the sanctions we had seen at the beginning was a self-sanctioning activity. I think it's easy to forget that four months ago, five months ago, Western governments were adamant that they were not going to target Russian energy with sanctions. They were going to target the rest of the economy, but they were very, very purposeful. And they were actually, the White House was annoyed about this self-sanctioning activity. They were like, we didn't want oil hit and y'all are hitting oil regardless because you're afraid of blowback. Whether that was legal or as like Shell learned early in the crisis kind of PR blowback when they bought that shipment of Russian crude, regardless, a lot of that has been, you know, that was a quick and kind of sudden hit. I do think a lot of those barrels that had been traveling Europe have found their way to less publicly kind of transparent and less publicly visible actors.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“So they have been ramping up gradually. And the one other thing, just before we go into, because I think this is a great way to kind of walk through them. I'd also add in just on a barrel basis, the US shale outlook. But those four things together are normally, you know, they're the four most important things right now in the oil market by a landslide. Normally we fight about oil analysts fight about like 500,000 barrels a day here or there on our balances. Each of those variables is like multi-million barrels a day of kind of swing, which to the point we were saying earlier about how the volatility I think is fundamentally justified. It's because everyone's trying to, it's like changing their models every other week because these moves are just so big. So with that out of the way.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“You mentioned three important geopolitical events that will affect the price of oil. The first is the EU sanctions on Russia, which you said will go into effect. The second is OPEC, the Organization of Oil Petroleum Exporting Countries, and their decisions. So that impacts the supply. And then the third is China's no code policy, which would impact demand. Let's start with Europe. So when do those sanctions go into effect? They haven't been in effect already. I thought that they were.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Where you could actually have a tighter market again. Now, I think the real tightness is going to come whenever China pulls back on its COVID zero policy disposition, which, as I wrote in my latest piece, doesn't seem likely, and I'm not particularly optimistic with some of the people that think it's going to be a sudden about face after the party Congress in October. That's kind of the overall theme that I think a lot of people are hanging their hats on right now. And I think it's more likely that any policy change like this is going to need to be heavily, clearly communicated.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“How much longer will it go? I think it's going to. I would be very, I would be shocked if they actually, if the White House decided to embark upon a second tranche of like a large volume of new crude released rather than just extending this one, that would be surprising in the current market. That said, even though those SPR barrels are, I would say, pretty objectively looking at their market not needed, Going forward into the end of the year, there could be a situation where they're needed again, which is I think, again, one of these reasons where like we should stop selling now so that we can sell potentially later. Because as of December 5th, you get the, you know, that trigger on the EU embargo against Russian imports. You have all these other things happening at this stage, you know, OPEC has basically added its barrels back. There's not much more coming there. So that's a moment.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“I wish they listened to me more, but I think beyond that, we've already seen that they've planned now to extend the duration of the sales into November. They were initially meant to end in October. So I think that the benefit, the good news for the market, if you're a bull, is that they haven't increased the overall size of the release. They're just spreading it out over a longer period of time. So I think that's the good news. The bad news is that if you were hoping for a kind of a sudden stop to the flow at the end of October, that no longer looks like it's going to happen.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Musings last week there was musings around whether or not the SPR would repurchase in the spot market if WTI fell below 80 and there was a source in the White House that was saying they're thinking about that and the DOE came out and denied it and I think again I think that even the White House and the DOE are working on slightly different scripts here because given how bizarre and different and kind of I'll call it cutting edge, the kind of SPR policy is, DOE is executing a policy that they're not used to executing whereas the White House is thinking about what's next in this kind of policy. So any kind of change to the policy I would expect to come from White House leaks rather than official DOE spokespeople. But I think that's just one of these things where we're like we're like right on the edge of what people are used to thinking about as acceptable or kind of possible like range of policy.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“But combined, that was enough to pull the market from one that was reasonably undersupplied to one that was decently oversupplied. And I think a better SPR policy framework would be able to react to that reality and stop selling when the curve is moving as flat as it is. You have seen.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And you literally arbitrage, right? So unfortunately, the structure and the kind of regulatory framework for the SPR didn't allow that immediately. There have actually been very optimistic moves that the DOE has taken to allow for more flexible purchase along the line. So I think there's a lot of, I think there's a lot of promise there, but you haven't seen any of those repurchases yet. The other thing was that when the release started, we were in extremely undersupplied markets with, like you were saying, prices at 120. The challenge with a very blunt and kind of fixed plan, Blike is very common for a government program like this, is that obviously the oil market has changed since that release started. And to your point, how much of this oil price collapse has been the SPR alone? Not all of it. I think that the other side is that, you know, China's demand.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Directly hit both sides of the calendar spread. So you basically pull up the back of the curve by buying and pull down the front. And you make money for the government.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so SBR has been a fun topic this year. I mean, just again, to put into the historical context, the SPR doesn't normally play this larger role ever. And the entirety of its existence, the largest drawdowns we saw were like 30, 40 million barrels. They were like very contained for much more time bound. They never had this big an impact. So the impact this year has been extreme at the point when the Biden administration decided to embark upon this release, it made a huge amount of sense. And I wrote a couple of pieces about this, and it becomes very political, very quickly, because it's a policy choice. But my argument was essentially that not only should you sell prompt crude to kind of bring the front of the curve down, which is what was hitting consumers, which was hitting the global economy, but you should also immediately purchase for refill down the curve. So what you do is you basically...”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Okay, tell me about the strategic petroleum reserve. The Biden administration, we started selling barrels of oil, releasing something like a million barrels a day, was it when oil was like 110, 120 bucks, to what degree did that ease the supply in the market? So now there's just a lot more oil. So, you know, to what degree is that the reason why the oil price has gone down? And now that oil is well below $80 is the selling going to continue or is the release going to continue? Or might they even start buying oil, which I've seen some people talking about?”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so you're saying a crash in oil is definitely possible, but if it does happen, it's extremely likely that the futures curve for oil will flip into contango before it does that, if it were to crash. And we're not in a contango yet, but we're much closer than we have been this year.”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT
“In terms of all those calendar spreads, so in terms of the shape of the curve, it just flattened so considerably. Whereas before we could kind of say like, even if you sold off, like, well, the sell-off, sure, but the curve is still super backgrated. We still have this immense kind of undersupply in the market. Now, I don't think you can be as sure of that. And I think when you look at it, there's a couple of different ways of thinking about the futures curve and the calendar spreads. One thing that I like to think about, and I wrote about this in a piece, is the idea of it as like a risk filter. And it's not perfect, but what you have seen before every single major oil price route, so in 2008 and 2014, and in 2020 during the pandemic, in the week-to-month before that price really just...”
2022-09-29 · Forward Guidance · Oil Will Trade Flat To Down Until Biden Backs Down & China Re-Opens | Rory Johnston · IDENTIFIED FROM THE TRANSCRIPT