One of the biggest factors in oil markets next year will be the impact of capital spending cuts on crude production, the chairman of energy-focused investment banking firm Petrie Partners said Wednesday.
U.S. crude stockpiles have reached historic highs and inventories around the world are rising as oil production remains strong in the face of declining commodity prices.
But drillers around the world — and particularly in the United States — have slashed capital spending in order to offset declining revenues, creating the expectation that new production will not keep pace with declining output in existing wells.
"The embedded [production] declines from the withdrawal of capital spending really could kick in, I think, in the course of 2016. When that happens, that's when you'll see a real change in inventory draw," he told CNBC's "Squawk Box."
Petrie sees evidence of a global petroleum and liquids output decline on the order of 4 million to 5 million barrels per day in the second half of 2016, and said production cuts will become a "big factor" beyond that. He projected oil prices would bottom at $31 to $33 per barrel.