Crude is on the move.
The commodity has surged more than 20 percent this year and is on pace for its best month since 2016 and its best January ever. Despite the gains, oil prices are still far from their multiyear highs after falling precipitously in October. According to one energy, expert the rally may have already hit a ceiling.
"We're now growing at an annual pace of over 2 million barrels a day, year over year, when demand only grows at 1-1.5 million, so something has got to give there," said Mike Kelly, head of E&P research at Seaport Global.
Crude's resurgence has been fueled by the latest bout of OPEC production cuts, as well as newly imposed sanctions targeting Venezuela's top oil producer. While the pullback in supply has lured oil investors back into the market of late, Kelly warns that it may not be enough to offset the production boom in the U.S. market.
"The world's swing producer, which is now us here in the U.S., ... they have to temper their growth a little bit," he warned on Tuesday on CNBC's "Futures Now." "There's a reason why OPEC's had to cut — it's because we've grown at a pace here that a year and a half ago people would've thought was ludicrous."
Kelly adds that a potential slowdown in demand could also send crude back down near $40 a barrel — a level not seen since the December market lows. Crude prices have fallen more than 29 percent from its intraday 52-week high of $76.41 last year.
To keep the upside momentum, Kelly said the potential combination of both Venezuelan and Iranian oil pulling out of the market could "give you a spike here over 70."
Kelly also noted that investors are now holding oil companies' "feet to the flames" to increase cash flow amid the surge in U.S. production.
"Historically they've all out spent their cash flow with their capex budgets," he said. "So that could potentially get you down to a more reasonable level of U.S. growth, and I think at that point you see more of a bid for crude."
West Texas Intermediate crude was trading higher on Wednesday, at around $54.70.