On Friday, U.S. Brent crude (@LCO.10) hit a fresh 12-year low as fears that the lifting of Iranian sanctions could flood an already oversupplied market for crude.
In spite of the sell-off, the man who correctly saw the steep market correction in August told CNBC that investors would be smart to buy oil at these levels — and short the stock market.
"Markets estimate the probability of a spike in oil, and a bear market at about 3 percent," JPMorgan's Marko Kolanovic, told the "Fast Money" last week. "But we think it's actually much higher."
Kolanovic's theory comes from looking at past instances of when crude has dramatically underperformed the equities market, as it is on Friday. In each of the 10 instances in the last 30 years this happened, oil eventually came back with a vengeance.
By the end of the year, the Global Head of Derivative and Quantitative strategy says $45-$50 oil is fully reasonable to expect while "the doubling of oil prices to $60 is actually quite possible."
Late Friday, analysts at Goldman Sachs told clients in a research note that a key theme for the year will be "real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016." The bank expects U.S. crude prices to rebound to $40 per barrel sometime before July.
So what exactly could send crude higher?
Potential drivers of oil, Kolanovic told CNBC, are a large covering of record shorts, or investor bets that crude will continue to slide. Additionally, the stabilization of many emerging markets that may lead to an uptick in demand, and the prospect that markets could finally see supply cuts agreed upon by oil producers, could also boost prices, he added.
"This convergence can happen in two ways," the analyst said. "You can have oil going higher or you can have S&P 500 Index (.INX) going lower, or some combination of the two," Kolanovic said. "We think this time isn't different than history, and we do think we'll see some convergence of that spread."
In equities, there are even more forces at play that could send the S&P into a bear market.
Triggers that will send the index lower are everything from stagflation, an "earnings recession" for S&P 500 stocks, change in investor sentiment, China's slowdown and consistent Fed hikes, Kolanovic says.
In his estimation, when you take a close look at the history of bull and bear markets over the last 50 years, there are a total of 20 cycles that correlate highly to the current market, both in size and duration. The average bull market lasts four years with returns of 90 percent, while the average bear market lasts one year, with an average pullback of 33 percent.
"If the bull market is to end now, it would be in line with history," Kolanovic told "Fast Money" producers. "I'm reading that there is more of a 50/50 chance rather than a 25 percent chance of going into a bear market."