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Here is oil's biggest problem and why

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China’s economic slowdown is, and will continue to be, the oil market’s biggest problem moving forward, John Kilduff, founder of Again Capital, said Friday.

“This China situation, to me, is very disturbing,” he said in a CNBC “Squawk Box” interview.


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“It’s the very key demand center for oil and we’re not going to have the kind of growth that we’ve experienced over the years. The whole commodity infrastructure got built out in the last several years to satisfy what was seen as insatiable Chinese demand for everything,” Kilduff added.

U.S. crude futures have taken a tumble since late June, falling from about $60 a barrel to around 6 ½-year lows.

Related: Oil could drop into the $20s

Kilduff also said he would not be surprised if oil prices fall into the mid-$20 range.TSRlogo1

“Some of the data we’ve been getting out of China is worsening. I think the government’s reaction to what’s going on with the Shanghai [composite] means it’s in a much worse situation than it’s being talked about.”

The Shanghai composite dropped more than 4 percent overnight, leading Japan’s Nikkei 225 index to fall nearly 3 percent.

Amid this drop in oil, the latest Federal Reserve minutes and the decline in global equities, the foreign exchange market has seen a reversal in some currency positions, especially within the euro, Boris Schlossberg, managing director of FX strategy at BK Asset Management, said in the same interview.BMDBannerNew

Related: US & OPEC keep pumping even with oil price declining

“That is a pure short-covering trade. This is going to get squeezed all the way up to $1.15 because everybody was short on the euro,” Schlossberg.

The common currency traded above $1.12 on Friday.

www.cnbc.com


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