Market Overview

Brace Yourselves For Crude Oil Below $40

Brace Yourselves For Crude Oil Below $40
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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 partner, 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 will probably be rebounding off new lows off the mid- to low-30s at 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.

Related Link: Oil Hasn't Recovered Yet, And The Proof Is In The Rigs

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've all 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."

Image Credit: Public Domain

Posted-In: Again Capital John KilduffAnalyst Color CNBC Commodities Top Stories Markets Media Best of Benzinga


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