Oil and Gas

Why I'm still bearish on oil: Stephen Schork

US industrial complex in recession: Schork

Oil has lost a third of its value since June, and well-known energy analyst Stephen Schork doesn't see a reason for it to turn around right now.

"I'm still bearish," the founder and editor of The Schork Report newsletter said in an interview with CNBC's "Closing Bell" on Wednesday.

U.S. crude closed lower after U.S. gasoline stocks rose more than expected, settling down 71 cents at $38.60 a barrel on Wednesday. was last up 42 cents at $43.63.

A oil rigger at the Schlumberger field prepares pipes in Midland, Texas on December 16, 2008.
Kirk McKoy | Los Angeles Times | Getty Images

Schork pointed out that the prices have become completely disconnected from fundamentals, noting that demand has never been stronger this summer, yet oil prices plummeted.

He believes the next target for traders is the 2009 low of $32.40.

"We're going to go into the fall where demand is going to be the weakest of the year," he said.

"If crude oil prices can fall 40 percent when demand is at its strongest, what's going to happen when demand falls to this weakest part of the year? So certainly the template for lower prices is there."

A man walks past the Schlumberger Ltd. booth at the DUG Eagle Ford Conference & Exhibition in San Antonio, Texas. (File Photo).
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US oil settles down 71 cents, or 1.81%, at $38.60 a barrel

Meanwhile, Schork is expecting more consolidation in the energy sector. Schlumberger announced Wednesday it plans to acquire oil equipment manufacturer Cameron International for $14.8 billion.

With crashing oil prices and banks redetermining credit to exploration and production firms this fall, companies will have the inability to hedge and will have to look at cash flow, he said.

That means some will have to seek to squeeze out productivity or sell assets.

"If you are selling assets in this market, you are selling into a buyer's market. So if you are a highly levered company you are easy pickings right now," said Schork.

And that means "finally" an "opportunity for a cash-rich company to swoop in and get some bargains now."

—CNBC's Fred Imbert and Reuters contributed to this report.