Kilduff Says Forget the Hype, Oil Will Fall Back to $25/bbl

John Kilduff calls the market reaction to the impending production freeze talks "ridiculous."

The recent rise in oil prices has caused the Average Global Bunker Price for IFO380 to jump some $20 per metric tonne (mt) over the last month, according to Ship & Bunker data; but bunker buyers need not be too concerned, if the prediction of some analysts Monday proves correct, as those analysts have dismissed the hype around a potential freeze on oil production and insisted prices will fall back to their previous lows.

John Kilduff, founding partner of Again Capital, says the global oil glut combined with the absence of any meaningful production cutback means that U.S. crude prices will plummet again to their February lows of $25 per barrel.

Speaking on CNBC's Worldwide Exchange, Kilduff also said of the impending Organization of the Petroleum Exporting Countries' (OPEC) member/non-member meeting in Qatar to discuss a production freeze, "I think it's going to be a buy-the-rumor, sell-the-news phenomenon to the extent they even do meet next month.

"It's certainly going to disappoint the market."

Kilduff dismissed the current oil price rally and its cause (publicity over the freeze) as "ridiculous, almost: just the fact that they're willing to cooperate to this mildest of degrees, you're seeing the bulls buy this market up."

Kilduff's views align with those of CNBC analyst Jim Cramer, who last month called the proposal by Saudi Arabia, Russia, Qatar, and Venezuela to freeze oil production "a total hoax" and warned that oil prices will plummet again.

Kilduff is focusing his attention on China, noting that the forward currency market had priced in a yuan devaluation following the Chinese New Year - which didn't happen.

He explained, "That's what sparked this whole rally across the board; I think it also saved the bacon for U.S. oil prices and producers."

As dramatic as Kilduff's prediction of $25 per barrel oil may be, it is conservative compared to a scenario proposed by Jeff Currie, head of commodities research at Goldman Sachs, who last month predicted that given the operational and financial stresses characterizing the market, the volatility in prices will be between $20 and $40 per barrel and that "I wouldn't be surprised if this market goes into the teens."