Oil price deja vu: Crude is going back down to $40, John Kilduff says

Things are going to get worse for oil markets before they get better, Again Capital's John Kilfduff said Friday.

Crude prices have recouped much of their losses over the past six sessions after tumbling to about $40 a barrel from the 2016 peaks above $50 in June. The rally has been driven by speculation that OPEC members and Russia could take measures to prop up prices after a number of energy officials said they would discuss intervening in the market during a conference in Algeria next month.

On Friday, the oil rally paused, with Brent (Intercontinental Exchange Europe: @LCO.1) slipping from a recent high above $51 a barrel and U.S. crude (New York Mercantile Exchange: @CL.1) trading at about $48.

Hopes for price intervention can send crude futures higher still, Kilduff said, but he warned oil prices will ultimately collapse again because top-exporter Saudi Arabia is not serious about taking action.

"We're probably going to touch 50 bucks. I think we're going to ring the bell before we can head back down," he told CNBC's "Squawk Box."

"I think we're going to go back down to at least $40 and possibly the mid $30s," he said.

Kilduff said Saudi Energy Minister Khalid al-Falih's comment last week that the kingdom will discuss coordinating action with other producers was "perfectly well-timed" to a moment when bets against rising oil prices were at record highs.

Indeed, his comments and others halted a slide in prices on worries that brimming fuel stockpiles would crush refinery demand for feedstock crude oil.

But the argument that producers will intervene is undermined by the fact many are ramping up production, he said.

Last week, the Saudis reported they pumped a record high of nearly 10.7 million barrels per day in July. Industry sources told Reuters the Saudis are only increasing production this month.

The Saudis are seen as the linchpin to any deal. In April, the kingdom withdrew its support for a proposal to freeze production at January levels after regional rival Iran said it would not participate.

Opinions on whether the Saudis will play ball this time are split between those who say they are preoccupied with defending their market share by offering discounts and those who say they are now more vested in the long-term price of oil as they seek to sell shares in the state-run oil giant Saudi Aramco.

In addition to record Saudi output, Kilduff noted oil has begun flowing from northern Iraq following a months-long outage and preliminary government data this week showed the biggest leap in weekly U.S. production in a year as drillers continue to put more rigs to work.

Kilduff is one of a number of analysts who have forecast oil prices would dip between the summer and fall due to the oversupply of gasoline and other fuel.

"I do think this will be the washout that will set up a broader run higher, more stable prices for next year," he said.