WTI Crude and Brent Crude are close to trading at $130 per barrel, but that could just be the start of a larger move. In the case of DoubleLine Capital CEO Jeff Gundlach’s prediction, the “Bond King” sees oil reaching stratospheric levels.
“I’m going to say $200 a barrel,” said Gundlach. “I think oil is going to get there. It’s up 35% in a week, so it’s on a tear, and we haven’t even talked about the potential for an embargo.”
Russia’s invasion of Ukraine is certainly pushing prices higher. However, the move towards renewable energy could have also had a hand in the latest price movements.
“We absolutely have made a really bad misstep,” Gundlach said. “We decided we hated a future with fossil fuel, but we didn’t have a plan to transition us from tremendous uses of fossil fuel into other sources of energy. Now we have this shortage, and we’re going to have to weirdly pivot back to more fossil fuel to ultimately get ourselves back on a path to the green fuels.”
The threat of stagflation is already causing investors to fret about stagnant economic growth. Oil price disruptions could also fuel an economic slump should it keep pushing higher.
“Historically, oil shocks have led to demand destruction that causes recessions,” Gundlach added. “We’re going to start hearing the word stagflation a lot more.”
2 Ways to Play Oil
In the meantime, traders can bask in the volatility with leveraged exchange traded funds (ETFs). One fund to consider is the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH ), which seeks daily investment results of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
For bearishness should oil prices drop, traders can opt for the Direxion Daily S&P Oil & Gas Exploration & Production Br 3X ETF (DRIP ). On the flip side, DRIP seeks daily investment results that equal 200% of the inverse of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index, which is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards (GICS).
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