From crude glut to a balanced oil market?

Oil prices will rise, supply fall: Oil analyst
Oil prices will rise, supply fall: Oil analyst

How long it will take the oil market to bounce back is a frequently asked question by energy investors. According to one equity analyst, the answer is looking beyond the coming months.

"I think [there's] very little visibility over the next six months," Kris Kelley of Janus Capital Group said Wednesday on CNBC's "Power Lunch." "But I think that if you step out beyond six months, it actually gets very visible."

He contends that as supply comes off the U.S. market, if production reaches 8 to 8 ½ million barrels a day, oil will balance out by the end of the year. Still, investors remain wary that a global production increase may offset any declines in shale supply.

Kelley says, however, that in the short-term span of six months global producers ramping up output can impact market supply, but both OPEC and non-OPEC producers are essentially at peak production, which challenges their ability to continue oversupplying the market a year from now.

"They're not going to be able to raise production to 500,000 or 1 million barrels a day, which is what the world will need to balance supply and demand," Kelley said as he forecast oil trading at $50 to $60 by year-end.

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Conversely, U.S. inventories surprised energy investors with a stock draw on Wednesday and oil subsequently settled up 5 percent. Crude stocks fell 4.9 million barrels last week as refineries continued to increase output and imports dropped, according to the Energy Information Administration.

U.S. oil settled at $37.75 a barrel, up 5.18 percent, while the internationally traded Brent rose $1.91 to $39.76 a barrel.

Not everyone is convinced of a long-term surge for oil, however. Michael Scialla, research analyst at Stifel, told CNBC's "Power Lunch" that his firm sees oil trading at $37 a barrel by year-end.

After downgrading five oil stocks to "hold" Wednesday, based on a potential weakness in balance sheets, Scialla does suggest that energy investors consider exploration and production company Concho Resources. The analyst said the stock is favorable even in a low environment and is "as well-positioned as any other company." Concho rose 4.5 percent Wednesday.

"They've got a pure play on the Permian; one of the best assets in the U.S.," he said. "[The] balance sheet is in good shape."

— Reuters contributed to this report. CNBC was not able to immediately confirm whether the analyst has a position in Concho Resources.