One More Correction for Oil Prices, John Kilduff Tells CNBC
NEW YORK (TheStreet) -- WTI Crude oil is down more than 7.5% this week, as gasoline inventories continue to hold steady in the U.S. and a 2 million barrel build of crude oil is undercutting Wednesday's petroleum numbers, which showed a 7 million barrel decrease in inventories.
John Kilduff, Founding Partner of Again Capital, believes the dip is due to oil companies scurrying to increase their cash flow.
"There seems to be a natural limit on the price because ... the first chance [oil companies] can get to make a dollar or two per barrel they're going to do it," Kilduff said on CNBC's "Power Lunch." "There's been a rush to judgment about this market coming in to balance because of some of these exogenous events that have populated the news wires."
While the rig count continued to rise for the fifth week in a row, the rigs that are opening are most likely uncompleted, but already drilled wells.
"These are ducks we talk about, where they're pretty much set and ready to go and they're just waiting for the right price point [to start operating]," Kilduff noted.
Wednesday's announcement of an enormous decline in inventories is usually bullish news, but Kilduff thinks the glut "of diesel fuel in Asia" and the "tremendous glut of gasoline here in the United States" needs to be worked off first. He believes there is and will be demand for gasoline in the U.S., bolstered by the recent trend of positive employment numbers.
"These prices have to correct again, at least one more time, before this whole situation can clear and maybe we can get to a more sustainable higher price," Kilduff added."