Oil may test $30 again this year: Trader

Oil’s turnaround

U.S. crude rallied for a third consecutive day Monday, posting its best three-day gain in 25 years, but traders may not have seen the last of $30 oil, Anthony Grisanti, president of GRZ Energy, said.

"We went from being oversold to being overbought in a matter of three days," he told CNBC's "Closing Bell."

Benchmark West Texas Intermediate touched a 6 ½-year low of $37.75 last week before rallying higher as short sellers moved to cover positions after an initial bounce.

The October contract for U.S. crude settled 8.8 percent higher at $49.20 on Monday, fueled by government data that showed U.S. crude production declined in June and signs that OPEC may be willing to work with other producers to stabilize oil prices.

Read More Oil ends up 8.8%, at $49.20 a barrel; highest since July 21

"Does this rally have legs?" Grisanti asked. "I'm not so sure about that because we still have a huge oversupply in crude oil around the world."

A sustained climb that brings U.S. crude back to $50 to $55 per barrel will spur U.S. shale oil drillers to bring new or idled production online, exasperating oversupply, Grisanti said. Unlike deep-water drilling, it take just a few weeks and a few million dollars to start up U.S. shale production, he said.

Two oil rigs at the Ladeira Heights oil field in Los Angeles.
Bob Berg | Getty Images

For the time being, an article published by OPEC on Monday saying the cartel is concerned about oil price pressure should only be taken as chatter, Grisanti said.

"As the organization has stressed on numerous occasions, it stands ready to talk to all other producers. But this has to be on a level playing field. OPEC will protect its own interests," the group said in a bulletin.

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Grisanti noted that Saudi Arabia, the world's No. 1 oil exporter, had recently exceeded its quota of 30 million barrels per day last month, producing 31.5 million bpd in July.

"They can't even get their own production under control, so I don't know how they're going to approach the rest of the world, especially the frackers in the U.S. that they declared war on," he said, referring to American oil producers who utilize hydraulic fracturing, a method of releasing hydrocarbons from shale rock by pumping water, chemicals and sand underground.

Oil futures had already been under pressure last fall when OPEC decided in November to maintain production levels and defend market share rather than cut output to prop up prices. That decision, aimed at forcing U.S. drillers to balance the market by turning off the tap, sent the cost of crude sharply lower.

OPEC meets Dec. 4, at which point the group will decide whether to scale back production or stay the course.

"I don't expect a production cut because it seems at this point they've weathered the worst part of it," Grisanti said. "At the same time ... I expect oil to test that $30 handle again."