The Strait of Hormuz, Oil Markets, and the Futures Curve with Nic Johnson | Treussard Talks (E21)

The Strait of Hormuz was always the thought experiment. The scenario commodities traders ran when they needed a stand-in for the unimaginable. Fifteen to twenty miles of waterway. One fifth of the world's oil. Now it isn't a thought experiment anymore.

Nic Johnson spent years at PIMCO as head of commodities, managing large commodities portfolios. Before that, he was a research fellow at NASA's Jet Propulsion Laboratory. He is one of the more technically grounded people I know on this topic — and a friend. We recorded this conversation two and a half weeks into the disruption. Not to predict what comes next. Neither of us knows. But to understand what is actually happening, and where to look if you want a clearer picture than the headlines are giving you.

What we cover:

• The physical reality — how oil moves through the Strait, what limited storage capacity means for exporters, and why strategic petroleum reserves buy weeks, not months
• Why $100 oil is high but not crazy high — and what the shale revolution did to the long-run marginal cost of production
• How the US, Europe, and more financially fragile economies experience this shock very differently — and what a populist export restriction would and wouldn't actually accomplish
• The futures market versus the physical market — why systemic contagion is unlikely, and where localized blowups could still happen
• The one indicator worth watching: not the headline spot price, but the oil futures curve — and why the front month and the five-year forward are telling very different stories right now
• Why anyone thinking about reinventing themselves as a commodity trader should understand what variant perception means before placing a single bet

Understanding your wealth requires understanding the world your wealth lives in. This is that conversation.

The content of Treussard Talks is for informational and educational purposes only and should not be considered financial advice. The views expressed are those of the host and guests and do not necessarily reflect the opinions of Treussard Capital Management or its affiliates. Listeners should consult with their own financial advisor before making any investment decisions. For full disclosures, visit treussard.com.

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This podcast is for entertainment and education only. Nothing here is financial advice. Treussard Capital Management is a registered investment advisor. Please visit our website treussard.com for additional information and disclaimers.