Crude oil prices fell 2 percent Tuesday to their lowest level since late August as concerns over supply and demand continued to weigh on the market. Oil is now down 16 percent from its Oct. 9 high, and one expert warns the commodity could hit sub-$40 levels sooner than later.
"I think we're going to continue to go lower and hit $40 and then [retest the August low]," Andy Lipow said Tuesday on CNBC's "Futures Now. "
For the president of Lipow Oil Associates, the crude oil market will remain under severe pressure as diesel fuel floods it "With the Chinese economy slowing down and less money being spent on construction, China is exporting more diesel fuel," he said. "Those supplies combined with the robust exports of diesel from Saudi Arabia and the U.S. have produced a glut of diesel fuel and jet fuel," Lipow added. "This is just bad news for the energy complex. "
As a result of that oversupply, Lipow expects refiners around the world to decrease demand, which should cause further weakness in the physical oil market.
"With OPEC doing nothing to reduce production and the impending return of Iranian oil to the market in 2016, prices will make another run at $40 pretty quickly, " he said. "I think that the worst period for crude oil will be in 1Q 2016 when refineries in the USA undergo a significant maintenance period and crude oil demand is once again reduced."
Lipow expects crude oil to continue to fall as low as $35 a barrel in the coming months. That's 18 percent lower from its current price of around $43. To note, a decline that severe would put the commodity at its lowest level since 2009.