Pickens: 'Domestic Oil Companies Need to Stop Drilling for Oil'

U.S. crude oil prices plunged to a three-year low Tuesday, and one cause of the move especially raised the hackles of legendary energy investor T. Boone Pickens—burgeoning U.S. oil output.

U.S. production has soared to 8.97 million barrels a day, the highest level in at least 31 years, according to the Energy Information Administration.

"Domestic oil companies need to stop drilling for oil," Pickens told CNBC. "We've over-drilled oil [in the United States.] Now we've gotten ourselves in a spot. We need to slow down."

December WTI oil futures settled at $77.19 a barrel on the Nymex Tuesday, down $1.59 from Monday and down 28 percent from late June.

Pickens anticipates that U.S. companies will eventually curb their production. "Of course nobody wants to be the first to blink," he said. "But, when the domestic drillers start feeling real pain [from low prices], they will blink."

The price drop will likely last through year-end, Pickens said. "But in the first quarter of next year I think we hit the low, and then I expect prices to recover."

Oil's slump has sent energy stocks down, and some experts now see them as a bargain. CNNMoney lists five to consider. 

• Chevron, the second biggest U.S. energy company after ExxonMobil. It sports a 3.7 percent dividend yield.
• Royal Dutch Shell, Europe's biggest oil company. It has a dividend yield of 5.5 percent.
• Magellan Midstream Partners, a pipeline owner. Its dividend yield is 3 percent.
• Spectra Energy Partners, another pipeline owner. It offers a 4.2 percent dividend yield.
• AmeriGas Partners, the country's largest retail propane marketer. It has a 7.7 percent dividend yield.

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