October 23, 2014

THAT'S THE CEILING, NOT THE FLOOR:

Oil will tumble to $70 says new 'bond king' (Matt Egan, October 23, 20, CNNMoney)

While Gundlach acknowledged China's economic slowdown is hurting oil prices, he mostly pointed to geopolitical drivers to support his bearish energy call.

"I'm convinced that Saudi Arabia wants the price of oil at $70," said Gundlach, CEO and Chief Investment Officer of Los-Angeles-based DoubleLine.

That's because the Arab country's budget can withstand lower oil prices than some other oil-producing countries, including arch rival Iran. Saudi Arabia raised eyebrows recently by ramping up production in the face of plummeting 
prices.

"They don't care if they run a short-term deficit because they love turning the screws on the people that mean them harm in the Middle East," said Gundlach, hinting at Iran.

Another leg down in oil prices would also be bad news for Russia, which relies heavily on oil revenue to balance its budget. Last week, Moody's cited plunging oil prices in its decision to downgrade Russia's credit rating two notches to just above "junk" status.

Posted by at October 23, 2014 12:01 PM
  

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