The state of the oil market

Phillip Streible, Blue Line Futures Chief Market Strategist joined Yahoo Finance's Jen Rogers and Myles Udland to discuss his outlook for oil and gold.

Video Transcript

JEN ROGERS: We are seeing stocks again off now just about 4%. [AUDIO OUT] here off 4.2%.

Let's do a little bit of commodities corner and talk about oil and gold. Oil prices extending their declines today. We've got record low US gasoline prices, leading a bunch of energy names down. It's no secret demand is just crushed worldwide. Let's bring in Phillip Streible, Blue Line Futures. How much lower can oil go here?

PHILLIP STREIBLE: Yeah, that's a really good question. And I mean, it really has to come with the supply side. We're expecting supply to come down quite a bit. Of course, Saudi Arabia and Russia, they have really stepped in, and they had provided, you know, that last burst of supply. That's going to take off some of the US shale producers.

We should see the supply side stabilize, though. They'll start paring back some of that [INAUDIBLE] shutting down over here. The big problem is demand. You just can't create demand right now. I mean, just about 20, 30 minutes ago, I had to cancel an airline and a flight that I was going to go on. And I was fully intending on going on it, it's just the hotel has shut down.

And I can just imagine that you've got millions of people across the United States constantly canceling these travel plans, canceling that demand for oil. And you're going to see oil prices continue to slide down. I do think we've stabilized high teens, low 20s, somewhere in there for quite a while until we can get a foot on this.

JEN ROGERS: I mean, I guess how do you know, how will investors know that we've actually bottomed?

PHILLIP STREIBLE: Well, it's always tough. I mean, like, you know, you look gasoline futures, they're continuing to slide lower. And you know, we think that we're going to come down to about $0.50 on gasoline. You look at across the nation, I mean, gasoline prices are, you know, in the low dollar range is the national average.

We'll probably start to stabilize. That's going to be the first mode of transportation people start getting back comfortable in and start really using. I mean, everyone is going to want to get out of the house. They're going to start driving. So we're going to see gasoline demand pick up a little bit.

Oil should follow it. But if you're going to trade this thing, you've got to go really far out. You know, we're buying [INAUDIBLE] 2021 call spreads in crude oil. Same thing with gasoline. So we're going with a whole other year and a half, two years out on any of our trades.

MYLES UDLAND: Phil, let's talk a little bit about what you're seeing in gold right now. Gold had a great run in 2019, and extended that run beginning of the year. It's been under a little bit of pressure here of late, but still $1,500 an ounce relative to where it was about a year ago. Not half bad. Where do you see gold headed from here?

PHILLIP STREIBLE: I think gold futures are going to catch a bid. So as long as we don't avoid what we've seen over the last, you know, three, four, five [INAUDIBLE] is where market had sold off, US equity markets come off and they kind of put the brakes on gold and they start liquidating everything, I think all the damage has really been done in US equities.

I think most people had liquidated any of the risk parts of their portfolio, just-- you know, I mean, if you've been laid off, you're sheltered in place, you're worried about how you're going to pay your bills, you're increasing more debt, you're going to liquidate those equity positions. So I don't see that additional risk, the margin calls weighing in on gold. I think that people are parking their money in gold, especially with this open-ended QE plan that the Fed's proposing.

JEN ROGERS: Are you surprised, though, that gold isn't up more here, given everything that's happened?

PHILLIP STREIBLE: There was like three or four sessions where, you know, the guys that I work with, and I work closely with clients, they were positioned long in the gold market. And then all of a sudden, US equities making new lows or the dollar index making new lows, and gold futures are not going up. Interest rates are hitting, you know, record lows, and gold futures aren't going up. Those are cautionary red flags you need to step inside for the market. Today was kind of if you're a long gold bond, it's kind of a breath of fresh air that markets are starting to go up, and they're not being affected by a selloff in equities.

JEN ROGERS: OK, Blue Line Futures' Phillip Streible, thanks so much for your time.

PHILLIP STREIBLE: Thanks for having me.