Oil prices could fall to the low $40s if they can't hold above the critical $52 level, and several factors are raising the risk of that occurring, John Kilduff told CNBC on Thursday.
From slowing global growth, especially in Asia, to Saudi Arabia's push for deeper production cuts, to rising tensions between India and Pakistan, various global triggers are putting pressure on crude oil prices, the Again Capital founding partner said on "Futures Now."
Despite these triggers, oil is currently having its best start to a year ever since commodity watchers began recording its price data in 1983. The commodity, which slipped by over 2 percent Friday, fell as low as $42.36 amid a marketwide sell-off in December 2018.
"The real critical center for crude oil is Asia and Asian demand, and the economic data out of Asia has been quite poor," Kilduff said. "And I'm not certain that even striking a trade deal with China is going to improve that country's fortunes."
As for India and Pakistan's nuclear conflict, Kilduff said that "any kind of conflagration in Asia, whether it be limited to India and Pakistan or spread to any degree to the region, would harm the economic activity there and that would only hasten the demand crisis that you could see here for oil prices in the near future."
Kilduff, whose firm specializes in alternative investments such as energy derivatives, added that Saudi Arabia's "tough stance" on decreasing its output could "unravel" the bullish thesis for crude. His bull case for the commodity states that if U.S. West Texas Intermediate, or WTI, crude oil futures can break above $58 a barrel, they could run to the mid-$60s.
But all of these global factors are eroding the rally's durability, and if the world's top oil producers don't work together to offset the United States' record crude production, it could spell trouble for prices, the market-watcher warned.
U.S. dollar strength can also weigh on crude prices, but the Federal Reserve's pledge to be patient with its interest rate hikes has made that less of a risk, said Kilduff, who is a CNBC contributor.
"The United States is going to remain an island of prosperity here," he explained. "We're going to have the only central bank that is just maybe doing nothing, as opposed to some of the other ones that are going to have to be more aggressive. Again, look at the Chinese central bank. I don't know if they're in full panic mode or not, but they are doing everything in their power to stimulate their economy including record loan issuances, which don't always work out well in the longer term. So I think the dollar is going to actually remain attractive, which should help me out a bit, but, again, we're in a tough spot here. "
Oil prices fell Friday despite a Reuters survey showing that OPEC lowered its production output in the first two months of 2019. Brent crude futures, the international benchmark, traded in the $65 to $67 range, and WTI crude futures hovered around the $55 and $56 levels.