The last $4 in the decline of crude oil prices was due to distressed players getting out of the market, MercBloc President Dan Dicker said Friday.
"What have been speculative positions are now at the lowest levels since 2010," he said, adding that it meant commodities-based hedge funds were "expecting a lot of redemptions in the fourth quarter."
traded lower to around $88 per barrel, its lowest level since December 2010, according to Reuters. West Texas intermediate crude dipped below $84 per barrel, its lowest level since 2012.
On CNBC's "Halftime Report," Dicker also said marginal shale oil producers are behind the drop in oil.
Energy exploration and production companies, he added, "are really forced to do some hedging here where they haven't before just to survive the next three quarters because if oil prices stay down here for the next six months to a year, if they do, they won't live."
Dicker, author of "Oil's Endless Bid," also said that highly leveraged companies, such as those focused on the Eagle Ford and Bakken shale oil fields, were particularly at risk.
"They simply cannot service the debt with prices that are hovering in the low $80s, and they're going to start to go broke," he said. "So, if you were worried that production from shale was going to be the reason that oil stays low, watch what happens if these prices stay here for several months. There's going to be a decrease in production almost immediately in several of these marginal players."
Dicker said those hurt by falling oil prices are exiting the trade. "And for a trader, that's a good sign if you think that oil prices are ultimately headed higher."
However, it was premature to call the bottom, he added.
"I've been in the market too long to make a prediction where the lows will be, but I do know that underneath $85 there's a lot of production that simply cannot come online," he said.
The Gulf of Mexico won't see any deep-water projects with crude under $85 per barrel, Dicker added.
OptionMonster's Jon Najarian said that hedge funds were getting rid of highly leveraged positions in crude, noting that at 1,000 barrels per future at $84 per barrel could be carried for around $2,400. "So, when you get those margin calls, that's what forces those liquidations, like what I believe we've seen over the past three days in crude."
Rosecliff Capital's Mike Murphy said that he was watching oil-services company, Halliburton.
"I'm looking for HAL to come down and test a little bit lower, but that's one of the first things I want to get back into in energy," he said.