The next two quarters will be tough on crude prices, but 2016 will be a year of transition for oil markets, IHS Vice Chairman Dan Yergin said Friday.

Yergin told CNBC's "Squawk Box" he expects oil markets to begin to balance next year or in 2017.

"The oil market "can't stay low like this because you're not going to have the investment you need," he said." "By 2020, the world oil market is going to need another 7 million barrels a day of production."

"Right now, the whole mantra is slow down, postpone, cancel projects," he added.

Multinational energy companies and U.S. shale oil producers have slashed capital spending in order to protect their balance sheets as their revenues plummet and cash flow dries up. Crude prices began to sink from historic highs last fall, and the downturn accelerated after OPEC announced it would not cut supply to balance oil markets.

Despite expectations that high-priced American crude production would collapse at $70 a barrel, U.S. producers can perform well at $55 to $60 per barrel. However, current prices in the $40 to $50 range are creating "great pain," he said.

Yergin said he does not expect OPEC to change its policy of maintaining current oil output levels to defend market share. The 12-member orgnization is meeting Friday in Vienna.