Oil oversupply may finally be correcting: Kilduff

$20 crude? About 40% chance: Pro

The rapid fall in U.S. crude oil production in recent weeks could be a sign the market is beginning to correct, Again Capital founding partner John Kilduff said Monday.

All eyes have been on U.S. oilfields as OPEC, led by Saudi Arabia, has opted to maintain production levels and defend market share. In doing so, the group hopes to force North American drillers to make the first output cuts in order to balance an oversupplied market.

The boom in oil production in recent years, and the corresponding oversupply, has largely been driven by the North American shale oil and gas revolution.

Kilduff recently told CNBC oil could fall into the $20s, but said he is now less confident that crude would in fact dip below $30. He put the odds at 40 percent, citing weekly government data that suggest U.S. production has fallen to 9.1 million barrels per day from a recent high of about 9.6 million bpd.

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"The U.S. production is coming down faster than even I thought," he told CNBC's "Squawk Box." "I think it's starting to correct already."

Goldman Sachs recently followed Kilduff's call with its own projection that oil prices could fall into the $20s.

When will oil hit bottom?

Stephen Schork, editor of the closely followed Schork Report, said prices absolutely could fall below $30, saying weakness on the demand side of the crude equation is exacerbating oversupply.

He expects oil production to continue to contract this year after banks reassess exploration and production companies' balance sheets and redetermine their creditworthiness this fall. With their assets now worth significantly less due to falling crude prices, Schork sees liquidity drying up and "the blood rushing down the street" in the oil patch turning into "a gusher."

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That liquidity crunch on the supply side will be compounded by economic contraction among BRICs nations, G-7 countries and the Asian tigers, he said.

Ultimately, supply will continue to outlast demand, and oil prices could test the financial crisis low of $32.40, Schork added.

"We get down that low, certainly we could break the $30 barrel between now and the fourth quarter."