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

Key Concepts

• Geopolitical Influence on Oil Prices: US policy, particularly sanctions against Venezuela, Iran, and Russia, is significantly impacting oil supply and prices, often counterintuitively.
• Crude Oil Market Cycles: The oil market exhibits a recurring pattern of price fluctuations linked to geopolitical events and anticipated supply changes, with a predictable cycle involving contango and backwardation.
• US Pragmatism in Energy Policy: The US demonstrates a pragmatic approach to energy security, prioritizing access to oil even from regimes considered problematic, shifting away from aggressive regime change policies.
• Forward Curve Trading Opportunities: Specific opportunities exist in the WTI crude oil forward curve, particularly in calendar spreads, based on anticipated shifts between contango and backwardation.
• Dollar & Gold Dynamics: The US Dollar is showing signs of strength, while Gold has reached new highs driven by geopolitical risk, but both are subject to potential retracements.
• Uranium Sector Strength: Uranium and related stocks are experiencing a structural rally.

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Market Overview (January 15th, 2026)

As of January 14th, 2026, the S&P 500 closed up 7 basis points at 6926, showing broader sector rotation. The US Dollar Index rose 32 basis points to 9905, retracing above its 50-day moving average. Crude oil prices saw substantial increases: February WTI Crude Oil was up 170 basis points to 6188, and March WTI Crude Oil jumped 1,070 basis points to 61.88, both significantly higher than 2025 lows. March RBOB Gasoline increased by 814 basis points to 186. Gold reached 52-week highs, up 388 basis points to 4635, with potential to reach 5000. March Copper also hit new highs, up 324 basis points to 605, while January Uranium rose 183 basis points to 8345. The US 10-Year Treasury Yield decreased slightly, down 1 basis point to 414. Key economic data releases next week include the Core PCE price index, US final GDP, and flash manufacturing & services PMIs.

Trump’s Oil Policy & Sanctions Impact

Rory Johnston argues that President Trump’s attempts to lower oil prices have been counterproductive. He posits that the oil price would likely be lower without the sanctions imposed on Venezuela, Iran, and Russia. Despite a global oil surplus of approximately 3 million barrels per day, prices remain elevated due to logistical bottlenecks created by these sanctions, preventing supply from reaching the market. A significant buildup of oil “on water” (stuck on tankers) across these sanctioned countries reached approximately 750,000 barrels per day in Q4 2025, effectively reducing available supply. Johnston stresses the difference between oil production and oil supply, highlighting that sanctioned countries are producing oil, but it’s inaccessible. Trump’s claim of securing 30-50 million barrels of Venezuelan oil is viewed skeptically, as accessing and delivering it would be complex, already reflected in rallying Brent crude prices and widening differentials for heavy crude.

Venezuela’s Oil Potential & US Strategy

Venezuela possesses substantial oil reserves, but its production capacity is hampered by a lack of foreign investment and domestic mismanagement. Restoring production to 1 million barrels per day is estimated to require at least 3-5 years and $50+ billion in investment. Trump’s strategy involves removing sanctions to incentivize investment, though concerns remain about the reliability of the Venezuelan power grid and the political/legal environment. The US government is expected to encourage US oil companies to invest, potentially with subsidies.

Geopolitical Risks & Market Reactions

The situation in Iran is a major concern, with potential for military intervention, contributing to the recent oil price rally. The attack on the CPC terminal in Kazakhstan has further disrupted oil flows, tightening supply. Johnston observes a cyclical pattern: oil prices weaken early in the month, rally mid-month due to geopolitical events, and potentially fall again later. He suggests potential coordination between White House policy announcements and these cyclical dips.

WTI Crude Oil Forward Curve & Trading Strategy

The WTI crude oil forward curve exhibits an unusual shape: pronounced backwardation up to March 2027, followed by a sudden shift to contango. This pattern has been observed for several months and identified as a potential trading opportunity. The recommended trade is to buy the March 2027 to March 2028 calendar spread (currently in contango), anticipating a flip to backwardation based on continued geopolitical risks. Monitoring prompt time spreads is crucial for identifying market tightness and trading opportunities.

Shifting US Foreign Policy & State Capitalism

The US, across administrations, demonstrates a willingness to collaborate with existing regimes, even problematic ones, rather than pursuing destabilizing regime change. The shift in US policy towards Venezuela under Trump, dealing with Maduro’s government instead of risking instability, exemplifies this. Chris Wright’s statement suggesting the US would partner with Iran if the current regime ended aligns with this pragmatic approach. A trend towards a “state capitalist fusion” is emerging, where the US might facilitate the marketing of crude oil from a new regime in exchange for access.

Dollar, Gold, and Uranium Market Observations

The US dollar is showing signs of breaking a downtrend, potentially driven by President Trump’s geopolitical posturing, but caution is advised. Gold has reached new all-time highs due to geopolitical risk, but a retracement is possible if the situation stabilizes. Uranium and uranium stocks are experiencing a structural rally. Specific option strategies, such as a put credit spread on WTI options, are being considered with a 62% implied probability of expiring above break even and a 1 in 4 chance of reaching max loss at the $55 strike.

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Conclusion

The current oil market is heavily influenced by geopolitical events and US policy decisions, particularly sanctions. While a global surplus exists, logistical constraints and strategic policy choices are preventing supply from reaching the market, driving prices higher. The cyclical nature of the oil market, coupled with the unusual shape of the WTI forward curve, presents specific trading opportunities. Furthermore, a pragmatic shift in US foreign policy prioritizes energy security and access over ideological concerns, suggesting a willingness to engage with existing regimes. The dollar, gold, and uranium markets are also responding to these broader geopolitical and economic trends, offering further investment considerations. Understanding these interconnected dynamics is crucial for navigating the current energy landscape.