Why oil could be going back to $70

3 bullish drivers for energy

Oil has fallen too far too fast, and benchmark Brent crude could be back at $70 or $80 per barrel, the CEO of Signal Investment Research said Tuesday.

Stephen Davis said on CNBC's "Squawk Box" he sees oil prices bouncing $10 In the next three to six months and believes prices could go much higher.

"The price of [Brent] oil has come down $55, which is a huge amount for the amount that we're oversupplied," he said. "People think it's just because we're oversupplied, but there's a lot of reasons why we're oversupplied, and those factors will reverse."

Read More Power Play: When to start investing in energy again

The cost of has fallen about 50 percent since hitting a high in June.

Three key drivers will send oil higher, Davis said. The first is the strength of the global growth. Signal believes China's economy is about to bottom and the situation in Europe is getting better.

Second, Davis said demand is picking up and will accelerate as the United States enters the summer driving season.

Last, Signal believes the U.S. economy is slowing, which will weaken the U.S. dollar. A weaker dollar supports oil prices because crude is transacted in dollars, making the commodity more affordable to holders of other currencies when the greenback falls.

Read More Expect Russian spoiler in Iran nuke talks: Critic

Top oil exporter Saudi Arabia can technically get oil out of the ground for $10 a barrel, but the country needs a higher price to support its state-supported social programs, Davis said.

"If you look at the Saudis' five-year budget, you see they need the cash just as much as we do," he said.

The Saudis are widely seen as having worsened the rout in oil prices by refusing to cut production in order to boost prices at a meeting of the Organization of the Petroleum Exporting Countries in November.