Oil prices languished near three-week lows on Tuesday, as worries about Europe's debt crisis fueled fears about the demand outlook for oil. But one analyst believes oil prices are headed higher, with markets already pricing in the worst case for the global economy.
“We've been talking about Greece defaulting for so long, I feel like this is just another opportunity to knock the price of crude oil down, and I think that right now, if anything, any dip should be bought,” John Licata, Chief Commodity Strategist at U.S.-based research consultancy Blue Phoenix told CNBC on Tuesday.
"We can see $95 crude in WTI (West Texas Intermediate) by the end of this year," Licata added, which represents a 10 percent upside from the current levels.
Nymex crude prices extended losses in the Asian morning session on Tuesday, hovering at $85.40 a barrel, after tumbling 2.6 percent overnight, or a total of 5 percent in the last two trading sessions.
While market watchers are hoping for a resumption of full supply from Libya after the fall of Moammar Gadhafi’s regime, with some predicting the country will be back to its pre-war production of 1.5 million barrels a day within 15 months, Licata is not as optimistic.
"I actually am in the camp that we're not going to see Libyan crude oil come on as quickly as possible, and I think that's only going to cause crude oil to catch more and more of an upside demand as we start to head into the cooler months, which we're already experiencing right now here in New York," he said.
Licata says between the two crude benchmarks, Nymex represents a better opportunity compared to Brent crude .
“I think there's an opportunity right now to lock in some gains and that the WTI which has actually significantly trailed the performance of Brent crude oil,” he said, and adds that investors should start diversifying away from gold into energy.
"I think we've actually seen the best levels in gold for the year. I think that we have the potential to go down another $150-$200," Licata noted, "To me that means the portfolio managers, the traders in gold, need to look for alternative ways to put their money to use toward the end of the year, and to me that's energy.