The Saudis, who spearheaded the current OPEC policy, will not agree to production cuts until they're confident that U.S. shale producers will not step up production afterward, John Kilduff, partner at investment advisory firm Again Capital told CNBC.
The Saudis likely won't feel comfortable about the chances of a U.S. output boost until production in the United States falls to 8.5 million barrels per day, Kilduff said. But it could be next year before U.S. output hits that level, he added.
U.S. oil production has fallen from a peak last year of nearly 9.7 million barrels per day to about 9.2 million, according to preliminary weekly EIA data.
"Until there's shock and awe in terms of bankruptcies and super-low prices, there's going to be unrelenting selling pressure in this market," Kilduff said. "We're going to have to wait to see what happens after the nuclear winter clears."
Kilduff said he's more convinced than ever that U.S. crude will eventually dip to $18 a barrel. It traded as low as $27.39 on Wednesday.
To be sure, financial pressures are mounting on U.S. drillers as they cope with such low prices. On Monday, investors ran for the exits on a report — later denied — that No. 2 U.S. natural gas driller Chesapeake Energy had hired advisors to file for bankruptcy. And on Tuesday, shares of Anadarko Petroleum sold off as the company slashed its dividend.
Forty-eight North American oil and gas companies have filed for bankruptcy since 2015, according to law firm Haynes & Boone. The next shakeout could come in April, when banks reassess the value of the assets against which drillers borrow money. Lenders have thus far been accommodating to the energy companies, hoping to avoid pushing energy firms over the edge and winding up owning their assets.
But a survey by Haynes & Boone suggests banks will tighten lending this spring. Lenders expect a 25 percent decrease from 2015 borrowing base levels, while borrowers anticipate a 28 percent cut.