Capex cuts will determine oil’s bottom: Analyst

Despite the most-recent rally, oil prices will keep on dropping until capital expenditure cuts filter through the market, RBC Capital's head of commodities research said Wednesday.

"You had rig count reductions and people said this is a turn, but the problem is you're battling with very-high inventory levels, and the [capital expenditures] cuts are probably not going to filter through [until] the back half of the year," Helima Croft told CNBC's "Squawk on the Street."

Croft added other factors could also cause oil prices to bottom. "[Those] are not based on actual production," she said. "Those are more geopolitical factors." Croft also said some of these external geopolitical factors have yet to filter through the oil market.

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"There's not a concern in the market right now about Nigeria," she said. "Their election was supposed to take place this weekend; it's been postponed. Historically, we've seen significant volumes of crude come off the market around Nigerian elections. In the 2003 elections ... we lost 850,000 barrels of production because of unrest around oil facilities."

Croft also said she expects oil to make a comeback as soon as early 2016, as long as capex cuts take effect. "This really should filter through 2016 and demand should recover," she said. "We should be looking at a much higher demand picture in 2016."

Nevertheless, Croft added that there will be a selloff on Wednesday if the rig count comes in higher than expected. U.S. crude inventories rose to 4.86 million barrels last week, topping analysts' estimates of 3.7 million. In early afternoon trading Wednesday, WTI was down 1.1 percent to about $49.50 per barrel, while Brent crude dropped 2.4 percent to $55.10 per barrel.

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—Reuters contributed to this report