Oil is classic case of very tight connection between supply and demand, with little capacitance (ability to store oil) in the system. There is a lag time in response between supply and demand of months.
Even mild oversupply means spare capacity in the system is filled and suppliers have to off-load somehow while they slowly ramp production down, driving the price down quickly.
However, if demand outstrips supply, the spare capacity in the system is used up quickly. Demand takes some time to respond, prices are driven up quickly.
I would not be surprised to see demand increase while supply is still dropping. The only confounding factor is if there is truly a world economic slowdown with reduced oil demand. My gut feeling is that the reduced price of oil will increase consumption or at worst hold it level even with such a slowdown.
As said in posts above several times, we are only talking about 1-2% variance between supply and demand. There is virtually no other industry I know of with such tight matching of supply and demand.
Oil is classic case of very tight connection between supply and...
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