Title: Oil Market Chaos: Geopolitics, SPR Drawdowns, and Price Predictions | John Love Show: The Acquirers Podcast Guest: John Love (oil/energy analyst) Hosts: Tobias Carlisle, JC Date: 2026-09-17 URL: https://youtu.be/c1bNAhKr56w Length: 12:03 Note: YouTube auto-transcript pasted by Stephen; fillers (um/uh/"you know" interjections) and stutters removed; wording otherwise verbatim; (mm:ss) cues verbatim, kept in place. ">>" marks a speaker change. Auto-transcript garbles fixed: "straight of moves"/"straight of Hormuz"=Strait of Hormuz, "Ping"=Xi Jinping, "bare case"=bear case. Transcript ends mid-answer at ~11:50 (as pasted).
00:00 Let's talk oil. Is it the most interesting market in the world at the moment? What's happening in oil? >> Oh, not much. It's been quiet. >> Yeah, it's been I would say the most exciting three months. For bad reasons. Obviously wars is never something you want to see, but it's been such a back and forth and just bizarre.
00:28 When it first broke out, obviously that was the most exciting point. And now, since April, we've been in a different place. I think there's some skepticism about what happens now. But where we are versus where we were, I'd say, entering the war period, I think the White House and some people in the market are a little skeptical now of higher prices.
00:52 There's still risk out there is what I'm trying to say. And I think there's a lot of skepticism about that risk because some of the most bearish calls, in fact, bearish calls that were pretty common, we're going to have $150 oil, we're going to have $200 oil.
01:08 At first, it was the end of March and then it's like, okay, we did the coordinated SPR release in the G7. So now we have till the end of April and that got pushed out and I think everybody's kind of like, well, did the industry cry wolf? Why didn't this materialize? And it's really because, not just the SPR release, but there were a number of things that I think people just, at the time, couldn't foresee.
01:31 I think one thing that we always discount is how creative industry can be in the face of crisis. And one of the things that we've seen is China had built up their reserves substantially over the previous 3 years, and they were able to rely on those, draw those down.
01:53 That's not going to last forever if this doesn't get resolved. I mean, if this doesn't truly get resolved as everybody's expecting right now. But that had a big effect on the price of oil and kept it down. >> Just before you move on to that, do you have any view on what caused that? Was that China accommodating the US by drawing down on its own reserves or >> I don't >> is it a slowdown in China or what was the reason for that? >> I don't think so. I think if you look at
02:25 it certainly helped us but I think it was more self-interest. You look at the other Asian economies, Korea, Japan, where they didn't have those kind of reserves, they had to have massive demand destruction which is going to impact your economy. China had the headroom to do that as well.
02:50 So I think it was, hey, this is what we have this for, let's use it. I just think it was self-interest. Things are a little soft over there. The last thing they want is significant impact from external events outside their control.
03:10 And they know that, or at least the gamble is, we use the reserves and then when the price goes back down, we refill them. The danger of course has been and remains, if this is not resolved, they get to the, and I think they're getting fairly close, they're going to have to say, "Well, right, we have to start importing again."
03:31 They also canceled most of their exports too. So they were basically somewhat self-sufficient, and a tremendous amount of the Middle East oil goes to China. So they really said all right, this is what we have to do. So my opinion, I think it was self-interest. I think it just happened to accommodate the US, but I could be wrong there.
03:54 There could have been some coordination, but I kind of think it was more what worked for China. >> I mean, Trump did go visit Xi Jinping in Beijing, but it was a little bit kind of like halfway through the process. I also wondered about the US strategic petroleum reserve.
04:12 There's been this sort of increasing chatter that we're getting closer to the bottom. I don't really know exactly what that means, whether that's like literally that they drain it or whether it sort of gets to a point where it's like not structurally sound if you pull too much oil out. But it seemed to suggest that we're like weeks away from the bottom of the SPR.
04:33 And I don't know what the consequences of that are, but can you fill us in what happens there? >> Well, first of all, I think yes, that is out there, a number of other things, cuz we're weeks away from this and that. I think this deal kind of had to happen right now. And so, but yeah, with the SPR it's at about 350 million barrels right now.
04:57 They've shown in the headlines, the last time it was that low is when they were filling it back in 1983, when it first got to that level. It got down to that level in '22 when we drained it for the Ukraine war, really to keep prices down, which I think proved to be probably unnecessary.
05:16 We didn't refill it for years. It started going back up a little bit and we got over, I can't remember the exact number, but maybe 450 million barrels, and then we've dropped it again. So if you get down to about 300 million barrels, that's the level where, yes, it's functionally harder if not impossible to pump out.
05:36 You do need a certain level in the tanks. Obviously you can get it out if you absolutely have to, but that might not be something where you can pump it as quickly as you could. So that functional floor we are getting close to, despite the fact that 300 million barrels is a lot of oil, but we really need to restock it.
05:55 One thing about the oil that is getting restocked right now or that will be restocked is the US government did something I think was fairly smart, which is they sold swap contracts. So for every barrel you take you have to give 1.25 barrels back. And so we'll be getting some additional build back in the SPR, not just the barrels coming back but even more beyond that.
06:24 So assuming we can get those barrels at a reasonable price. So that'll be the challenge. >> Well, we... Sorry, JC. >> I was going to say, assuming that we do rebuild, I've been wondering if everyone is not going to think like, well, I don't want this to happen again. Maybe I need to be like 150% of what I was running at before just to give myself more cushion.
06:44 And maybe structurally we just have higher oil prices for longer than >> Yeah, I think that's very much a possibility. I don't know what happens in the US cuz there's some dysfunction, but around the world governments are talking about that, they're talking about refilling and they are talking about that exact like 1.
07:06 5 or more, cuz yeah, it was a big wakeup call. In the US, we're more cushioned from it. So we can handle an SPR where it is right now as long as we don't go much lower. But the rest of the world can't. And it's not just oil, but it's distillate. It's gasoline. It's jet fuel.
07:25 So people are talking about making reserves for those where they might not have had them before as well. So one thing I think the market may be missing is that countries are going to be building back up their reserves, and to higher levels of reserves.
07:44 And that will probably put a floor on the price for a while. >> Before we came into this year, WTI was sub $60 and all of the valuations that I had done, I'd pencil in like $80 oil as sort of a bullish outcome, before the Iran conflict came around. Where do you see the oil prices now given that we may need to do these refills across the board? There seems to have been some infrastructure destroyed around the world.
08:17 What do you think is a base case, bear case, bull case for oil over the next five or 10 years? >> Five or 10 years. That's >> or whatever time frame you feel most comfortable with. >> Yeah, I'll say for the next year. A lot of infrastructure is damaged, we have to clean up the Strait of Hormuz.
08:38 We have to get things flowing again. And a lot of barrels have drawn down, not just SPRs but inventories around the globe, commercial inventories have been drawn down, so that all gets replenished. I think that over the next year, at least as that's happening, you probably do have a floor. I'm always hesitant, it's very difficult to put those things, there's millions of forecasts out there, but I think probably around 70. I wouldn't be surprised by dips
09:08 lower if something pessimistic happens. But I think I would probably put an average, at least on Brent oil, probably around 80, close to where it is now, with spikes up into 90. A lot depends again on global economy and all these external factors that it's hard to foresee, but I'd kind of center it around 80.
09:35 There's no guarantee that's where it's going to be. But I definitely see it's a volatile commodity. So a dip down to 70 at some point is possible. The one thing that could eventually push it down is OPEC. The one thing that supported the price for years was the OPEC put.
09:58 Every time it got down to a certain level they were putting quotas in place and voluntarily restricting production, very much a reverse of what they did in 2020. Now, even though they don't have the capability, they have symbolically raised their output targets. And as they are able to fill those over the next year, maybe not as high as they've published, but that's more oil going into the market.
10:24 So that'll be a little bit of a headwind to the price. But at the same time a lot of infrastructural damage and just logistics that have to be repaired. >> When you say that OPEC doesn't have the capability, what do you mean by that? >> So I think their most recent, just last week they announced 188 thousand... there were all the quotas and voluntary cuts they'd announced over the years, several million barrels. They started unwinding those
10:58 in 2024 and putting a little oil back on the market very cautiously, and when the Iran war broke out they suddenly said okay, we're going to throw 200, 400,000 barrels back into the market, but they couldn't actually do that because the Strait of Hormuz was closed. A lot of oil was trapped and their production was shut in because they can't get it out, they had to shut in production. So they actually aren't producing that much. They have to restart facilities, they have to get
11:28 the oil out through the Strait, there's this backlog. So even though they say all right, this is how much we'll produce, for example Saudi Arabia, I think they're able to produce about 7.5 million barrels a day right now. Their quota, or the level where they're willing to go to, is 10.
11:50 25 million barrels a day. So they're basically 25% below their target, and every country in the Middle East is kind of in the same boat right now.