John Johnston: Debunking the Tank Bottom Narrative and Oil Prices Going Forward

Veteran commodities trader John Johnston, also known as JJ, provides a detailed rebuttal to the prevailing narratives of oil market scarcity, arguing that the recent price volatility was a paper-driven phenomenon disconnected from physical realities. He explains that the price spike to $120 in March was fueled by the purchase of 750 million barrels worth of futures contracts in a short period, a massive speculative position that has been unwinding for weeks, pressuring prices. In reality, inventories were at near-record highs entering the conflict, with little actual disruption to supply. The US itself is structurally oversupplied, producing millions of barrels per day more than it consumes, while global proven reserves stand at a staggering 1.7 trillion barrels, rendering talk of shortages untenable.

Johnston deconstructs the concept of the Strategic Petroleum Reserve (SPR), revealing that recent drawdowns were not sales but structured repo agreements. The government lent barrels to companies with a 25% payback due in the future, meaning those future obligations have already been hedged in the market. He dismisses the "tank bottom" narrative about Cushing storage as technically misleading, explaining that operational capacity is vastly underreported and that the current system’s high throughput velocity makes a logistical failure highly improbable. This underscores a broader principle: if a narrative is not validated by price action, it should be ignored, as market participants with vested interests, like oil producers, will never claim a surplus.

Looking at the broader financial landscape, Johnston notes a shortage of dollars and a strong dollar environment acting as a headwind for commodities, with the market in a disinflationary liquidity contraction. Given this outlook, he sees no significant trade in flat oil price but suggests the long end of the Treasury curve offers value, expecting yields to fall. For equity exposure, he prefers gold miners and pipeline companies, which generate massive cash flows at current commodity prices, allowing him to comfortably weather volatility. Ultimately, he argues that market understanding comes from a position of detached amusement, not anxiety, and that the current oil market is a “great big nothingburger” that should be trading at lower levels.

Timestamps:
00:00:00 - Introduction
00:00:16 - Oil Market Perception vs Reality
00:07:30 - Refiner Profits Analysis
00:16:54 - Strategic Petroleum Reserve
00:23:27 - SPR Dynamics
00:27:00 - Tank Bottom Narrative
00:32:22 - Oil Dynamics & Manipulation
00:37:36 - Dollar and Macro Factors
00:44:36 - BLS Data Reliability
00:50:33 - Rates & Investment Strategies
00:55:30 - Concluding Thoughts

Guest:

John Johnston — Veteran Commodities Trader & Substack Publisher
John Johnston, known as JJ, is a veteran commodities trader with 48 years of experience. He began his career as a runner on Wall Street, became an account executive at Conti Commodities in 1976, and in 1977 purchased seats on the NYMEX and COMEX, trading from the pits for the next three decades.
Over his career, he worked for firms including Drexel Burnham Lambert, Rudolf Wolff, REFCO, Mann Financial, The Standard Bank of South Africa, and ADM Investor Services.

Through his Substack (jj745.substack.com), JJ shares a blend of old-school trading wisdom, selective technical analysis, market history, and lore. As he says, “I never try to be right. I try to be honest. I never want a reader to think what I think. I want the reader to know what I know.”
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