Gundlach: Oil Could Hit $150 This Summer

The price of oil, as measured by the benchmark WTI index, could hit $150 this summer, according to Jeffrey Gundlach. That price may not be sustained, he said, “but the path of least resistance for oil prices is up.”

Gundlach spoke to investors via a webcast, which he titled “It’s Not Unusual,” and the focus was on his flagship total-return fund (DBLTX). Slides from that webcast are available here. Gundlach is the founder and chairman of Los Angeles-based DoubleLine Capital.

The title is from a hit song sung by Tom Jones in the mid-1960s, which led to two appearances on the Ed Sullivan show. Gundlach chose it because, he said, “it is not unusual for markets to get unusual.”

But it would not be that unusual for WTI to hit $150/barrel. It peaked at $140 in 2008, during the great financial crisis. Adjusting for inflation, that would be greater than $150 today. WTI closed at $119.81/barrel on the day he spoke.

The real Fed funds rate is highly unusual, he said, at -749 basis points. The CPI has stopped rising year-over-year and will start to fall in the second half of this year. As it decreases and the Fed funds rate is hiked, the real Fed funds rate will increase.