Oil’s modest comeback did little to change the mind of one portfolio manager who is urging investors to avoid crude and energy stocks.
Chad Morganlander, portfolio manager at Washington Crossing Advisors, warned against oil on Thursday on CNBC’s “Trading Nation,” saying the fundamentals were looking weaker for the commodity over time.
“Our expectation is for lower lows in oil over the course of the next 18 to 24 months,” he said, especially because of technological changes in the shale industry and the rise of solar energy as a source of concern for crude.
Given that he also sees these industry changes accelerating, Morganlander says oil could fall to lows unseen since 2016.
On Friday, it continued its slight rise from Thursday, with U.S. benchmark West Texas Intermediate crude trading at $42.82.
“I wouldn’t be surprised to see oil prices go down to the mid-$30s over the course of the next 12 months, so I would be avoiding this entire sector altogether,” he said.
But with oil hovering near a 10-month low, iiTrader chief market strategist Bill Baruch says there are opportunities for investors to still trade crude to the upside. Baruch pointed out that there has been an increase in net short positions in crude futures as of late, which could signal that investors are “getting a bit of a tradeable bottom.”
For those looking to short crude, Baruch suggests: “Wait for a bounce back up to that $44 to $45, and look to sell at that point.”
Crude has tanked over 20 percent year to date, and is on pace for its worst week of 2017.