Oil prices will hit bottom by the end of the first quarter, according to an industry analyst.
Chad Mabry, of the energy and natural resources research department of MLV & Co., said in an interview with CNBC's "Squawk on the Street" on Monday that he expects oil to rise back to about $70 per barrel. "If you look at the fundamentals into the back half of 2015, we are seeing equilibrium on supply and demand balance," he said. "We are seeing supply come down."
Read More Could 2015 herald a 'new oil order'?
Mabry added the forecast supply drop will, in turn, drive up oil's demand, benefiting small- and mid-cap oil companies the most.
"We will see a fair amount of demand elasticity that will pick up and balance us back to our marginal costs of production," he said. "I can't call the bottom here, but the longer we do fall towards $40 per barrel, the harder that snap back will be towards that marginal cost of production."