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

Key Concepts

• President Trump’s policies are paradoxically contributing to higher oil prices despite aiming for lower prices, primarily through sanctions and geopolitical tensions.
• A recurring cyclical pattern exists in the WTI crude oil forward curve, shifting between backwardation and contango monthly, often coinciding with geopolitical events.
• The US is exhibiting a shift towards pragmatic energy policy, potentially willing to collaborate with authoritarian regimes for oil access, prioritizing supply over ideological concerns.
• Geopolitical events create temporary price volatility but ultimately delay, rather than eliminate, the arrival of oil supply to the market.
• A short-dated put credit spread on WTI options is presented as a trade capitalizing on a perceived price floor supported by geopolitical factors.

Geopolitical Influences & Trump’s Oil Policy (January 15th, 2026)

This discussion, recorded on January 15th, 2026, centers on the dynamics of the crude oil market, with a primary focus on the impact of President Trump’s policies and escalating geopolitical risks. A central argument is that Trump’s efforts to lower oil prices have been ineffective and, counterintuitively, have contributed to higher prices. This is largely attributed to increased sanctions on Venezuela, Iran, and Russia, which create logistical bottlenecks preventing sanctioned oil from reaching the market despite existing production. While Venezuela has an estimated 30-50 million barrels accumulated due to sanctions, the feasibility of delivering this volume to the US Gulf Coast is questioned, given the deterioration of the Venezuelan oil industry.

The potential for US military intervention in Iran is identified as a significant driver of a “geopolitical risk premium” in oil prices. The WTI crude oil forward curve exhibits an unusual pattern of pronounced backwardation up to March 2027, followed by a shift to contango, recurring monthly with a price spike often coinciding with mid-month geopolitical events. The impact of Ukrainian attacks on the Caspian Pipeline Consortium (CPC) terminal, reducing Kazakh oil exports by roughly 750,000 barrels/day, further contributes to market tightness. A global oil surplus is estimated at 3 million barrels/day, but sanctions prevent this surplus from alleviating price pressures.

Cyclical Market Patterns & Shifting US Energy Policy

The conversation highlights a cyclical pattern in the crude oil curve, fluctuating between backwardation and contango monthly, often linked to geopolitical events. This pattern began earlier in the month with the Iran situation, suggesting continued pressure on the front of the curve. The speaker suggests that crises don’t fundamentally alter the market narrative but rather postpone the arrival of oil supply.

A notable shift in US energy policy is observed, moving away from “democracy promotion” towards a pragmatic “state capitalist fusion.” Chris Wright’s statement regarding potential US collaboration with Iran on oil, regardless of the regime, exemplifies this shift. The US appears willing to prioritize oil access over ideological concerns, potentially mirroring past approaches with Venezuela. There is skepticism regarding the US appetite for long-term reconstruction efforts following potential regime change.

Market Technicals & Trade Strategy

The market is experiencing volatility, with silver in a “parabolic phase” exhibiting $5 daily swings. The URA ETF (uranium ETF) has broken above the 61.8% Fibonacci retracement level. The US dollar is “flirting with 99” on the Dixie index. The trade of the week is a short-dated put credit spread on WTI options, designed to monetize downside premium with defined risk, betting on a $55-$60 price floor supported by geopolitical factors. The implied probability of expiring above break even for the put credit spread is roughly 62%, with a max loss of $245 if WTI settles at or below $55.

Broader Market Observations

Beyond oil, the discussion briefly touches on equities, noting potential for a correction due to crowded positioning. The US dollar is exhibiting a changing trend, while gold and uranium are experiencing strong rallies. The 10-year Treasury note is consolidating quietly.

Conclusion

The analysis reveals a complex oil market heavily influenced by geopolitical factors and counterintuitive policy decisions. President Trump’s sanctions, intended to lower prices, are actively contributing to higher prices by creating supply bottlenecks. The cyclical nature of the oil curve, coupled with a pragmatic shift in US energy policy, suggests continued volatility and a willingness to prioritize supply security over ideological considerations. The proposed trade strategy reflects a belief in a geopolitical price floor, capitalizing on the perceived stability within a volatile market.