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Crude's recent brush with levels close to $40 per barrel has made a lot of energy watchers nervous, but a top market analyst believes that international events will conspire to send oil prices sharply higher over the next several months.
Helima Croft, the global head of commodities strategy at RBC Capital Markets, identified supply talk surrounding Libya and Nigeria as two "bearish red herrings" for the oil market. Instability in both countries has sharply curtailed production in both OPEC member states, with Nigerian supply cut in half as militants target the country's pipelines.
"Right now there is kind of this fear that we could get 900,000 additional barrels [per day] out of Libya, the head of the national company said that by year-end," Croft said last week on CNBC's "Futures Now."
Meanwhile, "there's this view that because Nigeria [has] resumed these amnesty payments, it's going to bounce back as well [with] 400,000, 500,000 barrels," she added, referring to funds the country is providing to militants in order to halt attacks on Nigeria's oil arteries.
Nevertheless, "we just think those producers are going to remain distressed," Croft said, meaning that global oil supplies will likely remain crimped, putting upward pressure on prices.
Amid global oversupply and a strong U.S. dollar, crude's downward spiral will continue, according to one of Wall Street's largest firms. But that may not be terrible news for all investors.
"Oil could get down to the $35 per barrel level, which would most certainly at this point take the equity markets with it," Bank of America Merrill Lynch's Paul Ciana told CNBC's "Futures Now" on Tuesday.
In January, crude and equities traded in a near identical correlation before the February lows. Ciana explained that with crude now down 21 percent from the year-to-date highs, he's concerned that eventually equities may feel the impact. Then, global markets could see another spike in volatility as investors grow worry about a correction.
Crude fell more than 1 percent on Tuesday to settle at its lowest level since April. On Wednesday, U.S. crude was up slightly but still below $40 a barrel.
"We could see the beta between crude and global markets increase again," Ciana said, referring to volatility. "Oil has reached the target from the technical top, and seasonals point to weakness in September to October."
Seasonal patterns may be the biggest headwind for crude, since prices typically peak in August toward the end of the summer U.S. driving season and then decline on average through November. With crude at the lows in August, Ciana sees trouble.
"Crude oil is already down so much from the June [$51 per barrel] highs," he said. Ultimately, Ciana said, this week's break below $40 could lead to a retracement of the year-to-date high-low range of $35.84. However, this movement could also provide a fresh opportunity for commodity investors in the mid-term.
"The next trade for crude oil would be to let it get down to the mid-30s and let some of that risk offset sentiment," Ciana said. "Let some of the headlines run and then take a stab at actually buying crude oil."
Ciana concluded that, at an intermediary trend perspective, if crude can hold the $35 support level the technical set-up would be in place to begin forming the right shoulder of a head-and-shoulders bottom pattern.
"From that point, we would need to see crude rally up to test the neckline and break through $52. That could launch crude oil much higher into 2017," Ciana said.
As the race for the White House heats up, former U.S. Representative Ron Paul says neither Hillary Clinton nor Donald Trump offer what the U.S. economy needs right now.
"I think neither one will restore a great, great economy, because I think there's too many mistakes out there, too much mal-investment, too much debt, too much pain to correct these things," Paul said last week on CNBC's "Futures Now."
The Libertarian firebrand has long predicted a bubble in stocks, and doesn't see Trump or Clinton offering solutions to the issues he feels plague the economy.
"I'm still looking for my third candidate," the former Republican Party presidential candidate said.
"I want just to move in the direction of less spending, less taxes, less regulations, less pruning of money, less power in the financial system, less power from the Federal Reserve and I don't see that candidate that will do that."
After a strong first half of the year, oil just posted its worst month since July 2015.
Despite fears that the commodity could retest the mid-$30 range, one closely-followed oil watcher is especially bullish on where energy is heading in the coming months and years—and investors should not get comfortable with currently low prices.
"It may get a little uglier with some European refinery shutdowns," admitted Tom Kloza recently on CNBC's "Futures Now" when discussing the potential for a near-term slowdown in the U.S. "But this is very seasonal."
The global head of energy analysis for the Oil Price Information Service (OPIS) explained that, while he expects to see a $39 handle for oil in the coming weeks, prices will see significant gains in the long-term.
"I'm pretty comfortable in predicting that crude oil prices will be much higher one year from now, two years from now, and three years from now with prices perhaps in the $50 to $75 range," Kloza told CNBC.
"But, like the New York Yankees, we may have to waddle through a long period of mediocrity and pain until things turn around," he added.
Crude oil hit a 2016 high of $51.67 on June 9, but has since fallen nearly to 20 percent.
"Speak softly and carry a big stick."
"When it comes to rate hikes, the Fed has no stick. All they can do is speak loudly," explained the CEO of Euro Pacific Capital on Tuesday on CNBC's "Futures Now" when discussing the Fed's strategy in 2016. "The Fed has been bluffing. They're finished tightening."
Furthermore, Schiff believes that the Fed already has the wheels in motion to enact another round of quantitative easing, but wants to represent the possibility of another rate hike to the market. Schiff maintained that if the Fed chooses to raise rates, the whole U.S. economy could implode.
"Instead, they keep positioning that they're about to raise rates, but then they keep coming up with one excuse after another," claimed Schiff, who stuck to the bearish view that the U.S. economy is on the doorstep of another recession.
"I think what they're going to do to ease monetary policy going forward is to adjust their rhetoric," explained Schiff, who noted that the Fed lacks mobility, with only a quarter of a point to maneuver within if it chooses to lower rates. "They'll start talking about not raising rates soon, then they may admit that they no longer have a bias to tightening, then they can say they have a bias to easing."
Schiff was also quick to dismiss Fed policy as the key driver behind this year's rally. Rather, he believes the market's ability to absorb Brexit aftershocks is what has helped stocks climb to record levels in 2016.
"When Brexit happened, central banks starting talking about more stimulus," noted Schiff. "I think it was Brexit that took the Fed out of the game. That's what caused the rally."
Since Britain's vote to the leave the EU, the Dow and S&P rallied 6 and 7 percent from the lows, respectively. With speculation that rates would be lowered around the world, Schiff believes the rally is "phony" and is based on the belief that there will be cheap money readily available for investors.
Schiff added that flawed central bank policies around the world have led to a "bond bubble" and warned investors about the draw of high-yielding treasuries.
"I don't own any bonds," he explained when pressed by "Futures Now" trader Scott Nations on why his bond fund is underperforming the market. "It's a bond fund that has no bonds, because I don't want to participate in a bond bubble. When the bond bubble bursts, my bond fund is going to be number one. All I have is very short-term debt in foreign currencies."
When confronted further by Nations about his call of no interest rates in 2015, Schiff was adamant that a quarter of a point is nothing to write home about.
"If you go back to late 2014, the consensus among most of the people that came on your show was that by the end of this year, the Fed will have raised interest rates between 6 and 8 times," argued Schiff. "I said they wouldn't raise them at all. Everybody was off by a mile! Nobody got closer than me!"
Of course, the Fed raised once in 2015, which led Schiff to maintain that he was far closer to being correct versus his colleagues on Wall Street.
"I knew that the Fed couldn't raise rates! The fact that they did one trivial quarter-point rate hike, and then back-tracked and took [other hikes] off the table proves that I was right," said Schiff. "They raised interest rates, the markets got crushed and the only reason the markets rallied back was because they stopped raising rates!"
The Fed will announce its July rate decision today with additional announcements scheduled for September, November and December. Schiff concluded that the Fed's next move will be a cut, not an increase in rates.
It's an indicator which may humble investors riding the record breaking S&P 500 Index's rally.
Jeroen Blokland, a widely followed money manager, finds stocks in the U.S. are too pricey based on a chart comparing the level of the market to the amount of sales generated by the companies within the S&P 500.
The higher the price-to-sales ratio rises, the more investors are paying per every dollar of revenue.
"What you see here is that the price-to-sales ratio has risen to the highest level in 15 years," Robeco Investment Solutions senior portfolio manager Blokland told CNBC's "Futures Now" recently.
"In order to justify these kind of valuations, you must anticipate that for now on that that sales will grow into the valuation," Blokland said. "So, sales growth has to pick up in order to justify this level. So far, we haven't seen that yet."
He acknowledges that growth has been decent in the U.S., but says that it doesn't nearly justify the recent record breaking levels.
So far this month, the S&P 500 has broken its intraday all-time high six times.
A catalyst? Foreign investors have been looking to the U.S. as a growth engine, as geopolitical issues cause uncertainty overseas.
Beyond valuations, Blokland believes the Federal Reserve could pose a problem for the rally.
The growing U.S. economy could push the Fed to raise interest rates this year and surprise a lot of investors, according to Blokland. Right now, the majority believes the Fed won't raise rates until 2017 — after the presidential election.
"If the economy keeps up, why not raise rates? They want to get off that very, very low level and normalize policy a bit," he said. "They have missed out on a couple of opportunities already."
As stocks and gold continue to climb in 2016, one of Wall Street's largest firms has a clear message for investors: There could be trouble brewing in this rally.
Prices on bullion and government debt, two of the safest of safe havens, have skyrocketed this year even as risk-sensitive assets have powered higheras well. According to some, that isn't a good thing.
"I believe we are seeing signs of froth in perceived safe assets," advised Stephen Parker, Head of Thematic Solutions for J.P. Morgan Private bank on CNBC's "Futures Now" last week.
Initially, Parker said, the optimism was warranted as fundamentals justified the risk rally. In particular, stronger-than-expected earnings, bolstered by top line revenue growth, have surprised to the upside, That "...is something we haven't seen in recent quarters," he said. Through Friday, 65 percent of earnings reports have come in above estimates led by beats from General Electric and Whirlpool, which has encouraged investors.
"You're seeing better signs of stabilizing economic growth," said Parker. "Economic surprises in the U.S. have reached their best levels since the beginning of 2015."
If you missed the boat on the recent gold and silver rally, fear not. Dennis Gartman says there's a different commodity that could give your portfolio a major boost in the coming weeks.
"Take a look at what's happening to cotton," the editor and publisher of "The Gartman Letter" said on Tuesday on CNBC's "Futures Now." "It's a market that nobody has been paying attention to and has been totally left off of everybody's radar."
Cotton futures are up nearly 19 percent in the last three months and are trading at levels not seen since June 2014. Those gains over the last few months are double what we have seen in gold and oil, which are both up roughly 7 percent in the same period. Year to date, cotton is up nearly 12 percent.
Gartman, whose first job out of graduate school was serving as an economist for Cotton Inc., says that the commodity has wrongfully received a somnolent reception in today's market. He added that in the past two weeks, the planted acreage for cotton was 10 million acres, which is far above the usual amount. From here, Gartman believes that news should have set up for a "very bearish report, and yet the market took that very well," as the data has been largely discounted by the market.
They say that good things come to those who wait — and that couldn't be truer for the bulls on Wall Street, according to one technical analyst.
Bank of America Merrill Lynch's Stephen Suttmeier said Tuesday the market recently experienced a "very rare signal" that could lead the S&P 500 as high as 2,400.
There were 414 calendar days between the May 2015 high and the recent one, Suttmeier said on CNBC's "Futures Now." The S&P 500 has been churning sideways for much of the last 24 months , without a meaningful breakout. But it's that lack momentum that has Suttmeier convinced we could be on the brink of the next leg higher.
He explained that since 1929 there have been 24 instances where the market went 300 calendar days or more without making a new 52-week high, and in those times the forward return was much stronger than average.
"The bottom line is when I look at these numbers and if we do follow this signal, 250 days out the average return is about 15.6 percent, the median return is about 14.8 percent and the market is up 91 percent of the time," he said.
Furthermore, Suttmeier cited improving market breadth, which measures the number of companies in the market advancing versus declining, and the number of companies hitting new 52-week highs as confirmation that this recent move past new highs could foreshadow the next great bull run.
"If you look at the price pattern here, it does support the case to get up to about 2,300 or even 2,400, and that dovetails with those targets from that signal," Suttmeier said. That's a respective 7 and 11 percent from where the S&P 500 is currently trading.
A massive global stockpile of oil could mean trouble ahead for the global crude market, according to Barclays.
Crude oil prices dropped to a two month low on Thursday, after the Energy Information Administration reported a smaller-than-expected decrease in oil stockpiles. That may be a canary in the coalmine, a top energy market watcher explained.
"For the last 6 quarters there's been this discrepancy between global supply and global demand," Michael Cohen, head of energy commodities research at Barclays, said last week on CNBC's "Futures Now."
Cohen said Barclays is bearish on oil for the next six to eight months, because the current stockpile could increase in an economic downturn, likely to drive prices lower. In the summer months, increased travel often increases the demand for gasoline, and drags up crude oil by default. Yet once that season ends, inventory levels may continue to rise.
Looking at a chart of the expected crude oil supply compared with the current amount, Cohen said the disconnect is staggering. The chart accounts for oil supply from the 38 countries in the Organization for Economic Cooperation and Development (OECD), which includes the U.S., U.K., France, Germany and Canada, among others.
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