One of the biggest stories over the past year and a half has been oil's epic tumble, which has reduced the price of a barrel of crude from nearly $110 to just more than $40. But one strategist says the commodity is set to stage a striking turnaround.
According to Emad Mostaque, a strategist at consulting company Ecstrat, crude oil is now trading at what is known as "half cycle costs"; that is, roughly the cost of getting the oil out of the ground.
His point is that $42 oil does not account for other important costs like that of finding the oil or purchasing the land in which the crude is situated. That would imply that the supply of oil will dry up over time.
"The case for triple digit oil is simply that demand stays where it is but supply starts to roll over into next year, but particularly into 2017, due to lack of investments," Mostaque said in a Tuesday "Trading Nation" interview.
Further, the market is extremely susceptible to geopolitical risks, he said. This is because there is no "geopolitical premium" baked into current prices, and yet falling oil prices could themselves create instability in one or more oil-producing nations.
If that happens, "you could easily get up above $130, because we just don't know where the easy oil is, because we're slashing our exploration spending," Mostaque said.