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Energy expert John Kilduff sees an unusual phenomenon affecting crude oil and beaten-down stocks.
According to the Again Capital founding partner. oil and stocks have embarked on the closest trading relationship since early 2016 and during the financial crisis sell-off.
`This has been the highest correlation that I`ve seen in quite some time.` he said Tuesday on CNBC`s `Futures Now.`
His latest thoughts came with U.S. benchmark West Texas Intermediate crude on track for its worst month in more than two years. WTI closed at $66.40 a barrel on Tuesday. while Brent crude settled at $76.23.
`A lot of folks like to trade crude oil and other commodities to get away from the correlations you have in the stock market.` said Kilduff. a CNBC contributor. `But over the past 20 days. you can see where stocks peak out in early October. Crude oil peaked out in early October.`
He suggests that fears of a global economic slowdown could be behind the rare move.
`It`s a real risk off. and the same things that are bedeviling the equity market are bedeviling the crude market.` he said.
However. Kilduff isn`t implying the trend spells more downside ahead. There`s a bullish factor hanging over the oil market: Iran.
On Sunday. sanctions against Iran exports are scheduled to go back into effect. And. it`s unclear how they`ll impact oil prices.
`We`ll know in a relatively short amount of time whether the sanctions on Iran are really going to bite or not. I think they are to a degree.` he said.
Taking that into account. Kilduff believes crude could break out of its slump within weeks and rally from current levels.
`I do see a nice rebound for crude oil as we get into the very end of the year. and the heart of the Northern Hemisphere winter of about $75-plus for crude WTI.` Kilduff said.
