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The surprising case for $100 oil

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.

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Still, that doesn't mean that everyone should rush out and buy oil immediately.

When it comes to investor sentiment toward oil, "you're in the complete-disgust phase," he said. "We could be in for one final blowout."

"But then the lower we go," said Mostaque, "the higher we'll end up in a few years' time."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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