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As crude oil prices continue their dramatic decline after a refusal by the Organization of Petroleum Exporting Countries (OPEC) to cut production, the key question now is, how much lower can oil go?

US WTI crude oil futures traded under USD 40 a barrel on Monday, while Brent oil future are hovered around USD 42 a barrel, having tanked more than 4 percent since OPEC's decision on Friday to keep its production ceiling at about 30 million barrels a day. Oil has now lost more than 50 percent over the past 18 months.

"There is no question that prices are going to continue to fall. The emotional impact of the latest OPEC meeting would suggest that prices might accelerate in their fall but I think the direction is obvious, they will get lower," Warren Gilman, chairman and CEO of CEF Holdings,told CNBC's Capital Connection. CEF is a Hong Kong-based investment firm owned by billionaire Li Ka-shing's Chueng Kong Holdings and Canadian Imperial Bank of Commerce,

"Where the bottom is will be a combination of factors: There will be geopolitical events, there'll be budgetary events, there'll be supply-demand fundamentals, and there'll be herd mentality…but there's no question that oil is heading down to the low USD 30s (a barrel). Will they break the USD 30s to the USD 20s? That's quite a possibility in 2016," he added

Despite talk that OPEC linchpin Saudi Arabia is suffering budgetary and currency constraints as a result of the oil price slump, the production cartel would be able to hold out for another 18 months, said Gilman.

"Saudi Arabia has a great deal of borrowing capacity. Whether it needs to defend its currency or whether it needs to borrow to make up for lost government revenues, it will do so and I believe it has capacity to do that for several years to come," said Gilman.

Although the Saudi nation budget is a point of stress, what will really influence country's oil output decisions for the next year or two is changes to supply and demand as a reaction to low prices, he added.

The Energy Information Administration (EIA) expects US crude oil production to fall by 400,000 barrels per day in 2016 as low prices discourage production.

Gilman said he expected the market to rebalance by end-2016 or mid-2017 as OPEC holds fast to its strategy of defending market share by squeezing out higher-cost producers.

Some observers believe, however, that OPEC's production level is now less relevant to controlling oil prices, because burgeoning output from outside the cartel would fill in any cuts it made.

"Why should it be up to OPEC to cut production when surplus production is coming from all over the world," said Vandana Hari, Asia editorial director at Platts, told CNBC.

First Published:Dec 7, 2015 2:24 PM IST