Oil prices: ‘We don’t know what an angry Vladimir Putin is going to do’ to crude oil supply, strategist says

Bob Iaccino, Path Trading Partners co-founder and The Stock Think Tank co-portfolio manager, joins Yahoo Finance Live to discuss where oil prices go from here as Putin's invasion of Ukraine continues.

Video Transcript

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BRAD SMITH: Welcome back to "Yahoo Finance Live," everyone. As oil prices show some slight retraction from their highs-- WTI was down 12% today-- consumer awareness of gas prices and the impact to their finances, that lingers. The difference today, you've also got some comments from the United Arab Emirates, calling for an increase in output. Bob Iaccino, who is the Path Trading Partners co-founder and chief market strategist and the stock think tank co-portfolio manager joins us now to help break this down further.

Great to discuss this matter with you, Bob. You've said that when dealing with Russia, actions matter much more than words. The only thing that is clear is uncertainty with relation to how Russian President Vladimir Putin will respond next to companies cutting ties, international condemnation, and even Russia's economy expected to be in recession. So what actions would you be watching for at this point that the markets will have no choice but to price in?

BOB IACCINO: Well, I couldn't have said it better myself in terms of the variables you have to look at when you're dealing with somebody like this. And these things have market implications. For example, we don't know what an angry Vladimir Putin is going to do in terms of crude oil supply. We already know the UK is cutting off oil imports. We already know the US is cutting off energy imports. Does Vladimir Putin now try a little retaliatory strike by keeping a discount on Russian crude to China, but raising it everywhere else, or possibly even cutting production or keeping production domestic within Russian borders and only going to Asia?

That could potentially-- we've got a nice pullback today, but that could potentially push crude oil above $135 a barrel on a settlement basis, possibly spiking above $150 or $160. Some research has shown that an average gas price of over $4 a gallon begins to change consumer behavior domestically. We have that now. We have certain areas in California with $6 gas. Chicago's over $5 a gallon now. These are prices that affect consumers.

And then you've got the nickel problem. You've got the aluminum problem. And all of these have pulled back. Copper, silver, they've all pulled back today. But we've all seen, in volatile markets like this, you mentioned to yourself, we've got a light pullback today-- 12%. Brad, I've talked to you for years. Have you ever called a 12% move a "light" move? That's because of the volatility we've seen. And with that kind of volatility, with the volatile leader that's involved in the main focus of these price hikes, it's disturbing in a lot of asset markets to me.

BRAD SMITH: So we paid close attention to how reflexive the equity market is, as well, to oil prices because of the impacts things even as far through as supply chains as well. So does the breather today-- to whatever extent that is-- signify to you that a bottom has been set in? Or is this just a dead cat bounce of sorts in advance of the next two FOMC meetings, since we largely have our guidance received for the upcoming meeting?

BOB IACCINO: What's interesting to me, I was listening to you guys talked to Brian, and I'm not sure there's anybody I respect more than him in terms of the macro picture. But when I heard him call this a correction, I kind of cringed a little bit, because these things have definitions.

You mentioned that the NASDAQ is in bear market territory. I think we're in the initial phase of a bear market. And again, S&P is in a correction. Dow's in a correction. But once they get to that 20% level, we're maybe in the shortest bear market in history, but we're still in a bear market. And the price action we see in equities now is bear market-style price action.

If you go back to the sort of 2 and 1/2 year collapse of the NASDAQ from about 1999 to about 2002-- it was actually late 1999, early 2000-- we had a 78% down move in the NASDAQ index. And within that, we had five separate rallies over 10%, two of those rallies over 20%, two of those rallies over 40%. One 35% rally within that 78% drop.

Now, that doesn't mean Brian's advice, in my opinion, is incorrect. I actually think that it is correct-- that investors need to continue to invest. But we look at markets completely different, as I am more of a short-term trader. In our stock portfolio, our average hold time is about 27 days. So when you look at a rally like this, they can be taken advantage of in the short term. However, it doesn't necessarily mean that a rally like this has turned us positive and out of a bear market back into another bull phase.

BRAD SMITH: Bob, I gotta hustle to my finish here, but the significance of a new movement today, UAE backing an increase in oil output among OPEC+ members. To what extent might this actually alleviate pressure at the pump in the future that consumers are seeing right now?

BOB IACCINO: Well, the numbers are more important than the gesture, just like the situation with Ukraine and Russia. It depends on how many barrels. The UAE, of course, one of the few countries that has spare capacity, along with Saudi Arabia. And you mentioned that, OPEC+. The biggest member of the plus side of OPEC+ is Russia.

So we have to see how many barrels that actually adds to the market. We don't know that yet. Demand is still increasing because of the reopening and the mask mandates being lifted, along with the summer driving season coming. So it's still a bit troublesome to me in terms of the inflation picture.

BRAD SMITH: Bob Iaccino, Path Trading Partners co-founder and chief market strategist and the Stock Think Tank co-portfolio manager. Always a pleasure to speak with you, Bob. Thanks for the time today.