Crude oil and crude ETFs are approaching monthly highs not seen since March, as ongoing inflation and the summer driving season arrives.
Consumers continue to experience pain at the pump, and it doesn’t appear likely they will get a reprieve anytime soon, according to analysts.
“A large spike in prices remains quite possible this summer,” Goldman Sachs strategists wrote in a report to clients.
JPMorgan’s Marko Kolanovic also projects oil will continue surging higher, and Wednesday’s moves in crude may be supporting his hypothesis.
U.S. benchmark, WTI Crude oil is up more than 2.2% on Wednesday, to reach over $122 per barrel, while Brent crude climbed over 2.3%.
Kolanovic, who operates as JPMorgan’s chief global markets strategist and co-head of global research, envisions oil at $150 a barrel and believes the U.S. consumer is capable of handling such exorbitant levels. “There could be some potential further spikes in oil, especially given… the situation in Europe and the war. So, we wouldn’t be surprised,” Kolanovic told CNBC’s “Fast Money” on Tuesday. “But it could be a short-lived spike and eventually, sort of, normalize.”
“We think the consumer can handle oil at $130, $135 because we had that back in 2010 to 2014. Inflation adjusted, that was basically the level. So, we think the consumer can handle that,” said Kolanovic, who has earned top honors from Institutional Investor for accurate forecasts multiple years in a row.
Interestingly, Kolanovic, unlike some other analysts, does not necessarily see the U.S. heading the global economy into a recession but recognizes it is important to prepare for all possibilities.
Rising crude could continue to be good news for ETF traders who favor crude oil. Crude ETFs like the United States Oil Fund (USO) and the ProShares Ultra Bloomberg Crude Oil (UCO) could see potentially massive gains, while short ETFs like the ProShares UltraShort Bloomberg Crude Oil (SCO) could suffer with rising prices.
For investors looking for crude ETFs to play the run-up in oil, which has been fairly steady since April of 2020, the United States 12 Month Oil Fund (USL) and the iPath Pure Beta Crude Oil ETN (OIL) are two other funds to consider.
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