Citi Expects Crude Oil To Trade In The $30s Soon

Crude oil prices have fallen in a straight line from beginning of August until now. While crude was trading safely near the $60 mark at the end of July, it has slided all the way down to the low $40s and today broke the $41 mark for the first time since early 2009.

Eric Lee, analyst at Citigroup, was on CNBC to share his outlook on crude oil for the near future and discuss what is responsible for driving the prices lower.

Oil To Trade In The $30s Soon

"In our outlook, we do see WTI hitting maybe the 3 handle sometime soon or if not, certainly the fourth quarter looks like a good candidate for when that might happen," Lee said.

Related Link: Why Crude Oil Could Still Fall To $30/Barrel

Shale Changed The Whole Game

Lee was asked what is causing crude oil to drift lower: higher supply or a weaker demand. He replied, "Well, I mean, clearly it's a bit of both. But it really seems like supply is the big driver here. We are really in the first rebalancing of what you might call the shale era. The single biggest factor of getting us from $100 oil to $50 oil really is shale. And the rebalancing isn't done yet."

He continued, "Shale muscled into the middle of the cost curve, around say the $30-$40 to $70 kind of cost level. But, it's not settled yet, it's still moving down. Cost deflation in the sector is pretty spectacular due to low utilization in the services sector, but also productivity gains."