Oil prices will be in the $60 range by the end of the year, says Pavel Molchanov, senior vice president and energy analyst at Raymond James. Although global demand is only rising slightly, Molchanov said supply will be in negative territory by the second half of the year.
Crude oil fell sharply on Tuesday after Saudi oil minister Ali Ibrahim Naimi said oil cuts won't happen. However, the freeze proposed last week by Saudi Arabia, Russia, Qatar and Venezuela that would cap production at January levels gives Molchanov hope for a supply cut.
"It's watered down. It's obviously not a cut in and of itself, but they did reach an agreement on, at least, capping further supply growth," said Molchanov on CNBC's Power Lunch on Tuesday. He called it a symbolic move that may show willingness to move toward a cut.
Although U.S. crude oil inventories are at "historically high levels" for this time of year, according to the Energy Information Adminstration's Weekly Petroleum Status report, Molchanov predicts inventories will trend lower by the middle of the year as prices recover.
"We are not talking about $100; it's not going back to $100. But certainly something in the $50 to $60 range; maybe north of $60 looks like a good bet over the next nine to 12 months," Molchanov said.