Oil Ground Up

• Unpacking Oil's Virtual Barrel and How 'Fast Money' Drives Oil Prices

  Today we speak with Dr. Ilia Bouchouev, former President of Koch Global Partners where he launched and managed the global derivatives trading business for over 20 years. Traditional supply and demand models no longer explain the oil market, where the correlation between fundamentals and price is now close to zero. Ilia leads Rory into a narrative about his "virtual barrel" thesis, exploring why the market now trades 60 times more oil on paper than is physically consumed daily. Ilia introduces a new paradigm for understanding price formation: modeling the "reaction function" of market participants to a host of factors beyond just fundamentals, such as macroeconomic data, flows, and even tweets. Discover the real "who's who" as Ilia debunks common misinterpretations of the Commitment of Traders report, revealing the blurred lines between hedgers and speculators.Learn about the different speculative players, from algorithmic CTAs to "quantamental" funds, and how "fast money" has proven to be the most profitable and volatile force driving short-term prices. The conversation also explores how professional traders analyze the complex futures curve, using carry trades and convexity to trade spreads rather than direction. Finally, understand the macro tug-of-war between traders using oil for recession hedging versus those using it to hedge against inflation, and gain a new framework for analyzing one of the world's most critical commoditiesOGU Listeners are now offered a special offer for Rory Johnston's Commodity Context Newsletter. Learn more about a subscription HERE.

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• Energy Risk Unpacked with Steve Sinos: Hedging Energy's Volatility

  ory dives deep into energy risk management with industry veteran Steve Sinos. Steve, with over 20 years of experience, explains how energy derivatives—from Futures and Options to CFDs—are crucial risk management tools designed to shift, not destroy, market risk. The episode frames this through the practical scenario of advising a regional airline on hedging its largest cost: fuel price exposure. Steve details the non-mechanical, iterative process of understanding controllable versus unknowable factors, emphasizing that effective risk management forces explicit trade-offs to achieve strategic goals. The discussion covers the diverse hedging approaches of airlines and E&P companies, focusing on product selection, instrument choice, and the critical challenge of basis risk. He shares insights on managing for quantifiable success over predicting "black swan" events, and the shift towards optimizing the "efficiency of a risk dollar" for specific cash flow targets. Listeners will also learn about interpreting complex market data like Commitment of Traders (COT) reports to avoid speculative biases and navigating unique market structures, such as the current "smiley curve" in crude futures. This episode underscores the risk manager's role as a "therapist," helping strategic leaders make informed decisions by understanding the sacrifices required to meet their objectives

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• The Policy Price Tag: Inside the Uneconomic World of Renewable Diesel

  Rory speaks with Bloomberg expert Brett Gibbs about the Renewable Fuel Standard (RFS) and its profound impact across energy, agriculture, and gasoline prices. Brett highlights the market's policy-driven nature, contrasting stable ethanol volumes with the rapid, four-fold growth of renewable diesel, which now significantly displaces petroleum diesel. A key distinction is renewable diesel's chemical identity to petroleum diesel, allowing one-for-one substitution and no blend limits, unlike biodiesel. However, renewable diesel production remains uneconomic without crucial policy support like RFS RINs and tax credits, as feedstock costs (e.g., soybean oil at $4/gallon) vastly exceed petroleum diesel prices ($2.33/gallon). The conversation delves into the RFS's complex credit system and recent policy shifts favoring domestic feedstocks, such as the removal of indirect land use change penalties on US soybean oil, boosting its tax credit value. While roughly 50% of feedstocks are waste-based, scaling these is challenging, leading to reliance on virgin oils like soybean oil, which accounts for up to 50% of US soybean oil production now. Looking ahead, the US biofuel industry is expected to see a plateau in growth, with the administration aiming for stable 80% utilization to balance agricultural support with consumer fuel costs, while buying time for new technologies. Key indicators for tracking the market include the D4 RIN price and soybean oil prices

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• Price Sensitivities in US Shale and Breakeven Metrics: Brandon Myers on Forecasted Stability

  In this conversation, Brandon Myers from Novi Labs discusses the intricacies of shale production, focusing on type curves, price sensitivity, and the evolving landscape of the US shale patch. He emphasizes the importance of understanding breakeven metrics and the impact of inventory dynamics on future production. The discussion also highlights the role of efficiency gains and technological advancements in drilling, as well as the influence of external factors such as tariffs and regulatory changes on operational costs. Myers provides insights into the future of US shale, addressing common misconceptions and the importance of human expertise in the industry.

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• Tariff Tensions: US-India Trade Under the Spotlight with Russia in the Shadows

  In this episode of the Oil Ground Up podcast, host Rory Johnston delves into the complex dynamics of US-India trade relations, focusing on the recent imposition of secondary tariffs by President Trump in response to India's continued purchases of Russian oil. Joined by Gregory Brew, a senior analyst at Eurasia Group, the discussion explores whether these tariffs are a strategic move in broader trade negotiations or a direct response to the India-Russia oil trade. Tune in to understand the implications of these tariffs on global oil markets and the geopolitical landscape. #USIndiaTrade #Tariffs #OilMarket

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