For those betting on future rallies in crude, veteran commodities watcher Dennis Gartman has a stern warning: Don't get your hopes up.
Although oil has clawed back to near $40 after a deep sell-off, crude is still off more than 30 percent year-to-date. With so much lost ground to cover, that makes investors like Gartman believe the worst isn't over just yet, especially with U.S. production being crimped by oil's slide.
"There is a lot of crude oil that has been capped and, on the rally, those caps are coming off that production," the publisher of the Gartman Letter told CNBC's "Futures Now" in an interview last week. "There's a lot of overhead that has to be accommodated. That tends...toward lower prices."
Gartman further explained that hedges have to come back into effect if and when the caps come off. Currently, he estimates that there are 300-400 wells across the U.S. that have capped production under current prices.
"It's still a bear market in crude oil: each low is lower [and] each high is lower," added Gartman, who believes that crude supplies are now abundant. "The contango [and] the carrying charges have begun widening out again," Gartman said. Contango is the difference between crude oil contracted to be delivered in the near term, and oil to be delivered further in the future.