Analyst: We've got an oversupplied oil market

Best way to play the oil patch: Pro

Raymond James energy analyst Darren Horowitz said on Thursday that a lot of factors point to more oil price drops yet to come.

"If you back out all of the geopolitical issues both on the supply and demand side, and you just look at the fundamentals, we've got an oversupplied market and the only thing that can correct that is lower prices," he told CNBC's "Squawk on the Street."

Horowitz said that other factors including U.S. oil inventories, Iranian sanctions and geopolitical risk could push crude prices further down. If Iranian sanctions are lifted, it could mean an incremental 500,000 barrels a day coming into the market.

Read MoreBrent crude dips 4% after officials announce Iran press event

Horowitz does not expect a lot of M&A deals this year since there is a lot of private equity in the mainstream asset class. He also said that dividends are safe in this sector because "a lot of the cash flows are very stable and transparent so you should be able to clip a pretty good coupon in this market."

He recommends investors focus on refiners and pipeline stocks in case of a further supply correction.

"It feels like there is downward pressure on price so you are going to want to stay away from the commoditized service companies," he said. "And I think you want to play defense and focus on stable cash flow."

Liquid propane is transloaded from a truck to a rail car at the Red River Supply Inc. rail yard in Williston, North Dakota.
Daniel Acker | Bloomberg | Getty Images