Oil continued its sharp selloff Wednesday, with West Texas Intermediate crude for December delivery tumbling another 2.9% to settle at just $45.34 on the New York Mercantile Exchange. WTI had been trading above $50 a barrel just days earlier.
Crude tanked after the U.S. Energy Information Administration reported that America's oil inventories soared by 14.4 million barrels for the week ending Oct. 28 to reach 482.6 million barrels.
The EIA said in a statement that the increases put oil inventories "at the upper limit of the average range for this time of year." The buildup was bolstered by rise in imports, which averaged 9 million barrels per day last week -- an increase of 2 million barrels per day from the previous week. The EIA also noted that imports were up 7% over the past month vs. the same period last year.
Oppenheimer analyst Fadel Gheit predicted that oil prices will remain "sloppy," telling Real Money that he expects lower crude prices for longer.
Gheit said that while exploration-and-production companies will get "squeezed financially" going forward, they can't afford not to continue pumping oil. He added that since many E&P companies have cut their costs significantly, "they can stay in business even at $40 a barrel for oil."
However, Gheit said that not all energy firms are resilient enough to withstand $40-a-barrel oil, and he believes that "there will be casualties." The analyst noted that approximately 60 energy companies entered bankruptcy in the past two years, and he believes some -- such as the smaller companies with higher debt levels -- will wind up back there.
Companies will likely continue cutting costs, but Gheit suggested that the next phase in the sector could be mergers and acquisitions. "The industry is in bad financial shape," he said. "The goal is not to increase production. The goal is to survive."
Aside from the U.S. inventory numbers, the fact that the Organization of Petroleum Exporting Countries has yet to implement a tentative production deal is further weighing on oil prices.
OPEC leaders agreed in September to possibly curtail the cartel's production by 200,000 to 700,000 barrels a day. However, Iran, Nigeria and Libya have already received exemptions from the planned cuts, while Iraq has also been pushing for an exclusion. Gheit added that OPEC member Venezuela is "desperate for cash" and unlikely to agree to any production cuts.
While an OPEC session in Vienna last weekend failed to finalize an agreement, the cartel is looking to reach a decision by a planned Nov. 30 meeting. All eyes are now on No. 1 OPEC producer Saudi Arabia to see if a deal gets done.
However, the U.S. presidential election will come even before the OPEC meeting.
Canaccord Genuity analysts wrote in a research note Wednesday that they view Republican candidate Donald Trump as "marginally more positive for the energy industry than Mrs. Clinton, but [not] a game-changer." The analysts added that while Trump has promised to liberalize U.S. drilling rules, they don't see regulatory burdens he can overturn as affecting oil-and-gas production directly.
As for his opponent Hillary Clinton, the Canaccord analysts regard the Democrat as being "a pragmatist" and believe she is unlikely to challenge the energy industry in a meaningful fashion.
"We continue to believe the oil markets will move further to rebalancing in 2017, providing support for pricing and oil-and-gas stocks," the analysts wrote.
Gheit said that all markets can hope for someone in the White House who will continue to support energy independence.
"Bottom line: the industry will still produce, but it will come at a high cost," he said. "We've seen the bottom of oil prices in February, [but] we're not going to see $60 [oil prices] any time soon."