Brace Yourselves For Crude Oil Below $40 By Year End In This 'Golden Era For Refiners'

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After recovering significantly during the second-quarter, crude oil prices lost most of their gains during July and are now back trading below the $50 mark. While some analysts expect the prices to remain in this range for a considerable period of time, John Kilduff, Again Capital Parnters, thinks that there is much more downside to crude from here on.


Kilduff was on CNBC Thursday to discuss his outlook for crude oil prices growing forward and what's going to drive prices lower.


Will Trade In 30s By Year End


"Christmas time we would probably be rebounding off new lows of the mid-to-low 30sat that point," Kilduff said. "We have a lot to go. We are going to take out the march lows of $43 and trade down to $30s in my view.


The Catalyst


On what's going to be the catalyst for that decline, Kilduff said, "The catalyst you are going to hear about next is this global glut of diesel fuel. The Saudis [have] stepped up and really ramped up their refining capacity, so have the Chinese. And they are flooding the Asian market right now."


Golden Era For Refiners


Kilduff was asked the reason behind Saudi Arabia and China increasing their refining capacity. He replied, "It's you hear analyst come out all time talking about this golden era for refiners. I've seen recommendations left and right to buy the refiners. You are still making $30 [bucks] a barrel turning crude into gasoline here."


"And so, they just all [have] been a rush into it and now it's going to see the tipping point. Just the way crude hit a tipping point last year, you are going to see this diesel fuel take down them next."

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Posted In: CNBCMedia
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