Smashed. The oil complex is in tatters. Amidst the break-up of OEPC, negative prices, and widespread job losses, the sector is fighting for survival. On April 26th the driller, Diamond Offshore, collapsed under a mountain of debt. It wasn’t the first and, as losses mount, it won’t be the last. Medium term a higher oil price is not a contrarian view. Demand will come back and surpluses will be cleared. Higher prices are needed to incentivise new production. The hard part is the timing. Take demand. It’s slowly coming back. Driving data shows a sharp recovery across many countries as lockdown measures are eased. Airlines too, are now talking about re-starting schedules, albeit tentatively. If these trends continue, come Q4, the demand side will look very different. Turning to supply, IHS talk of a near 3m barrels/day of supply disappearing; shut in. Never to return. US onshore, meanwhile, has been routed and with capex slammed and pale-faced bankers staring at souring loan books, faces a production profile far different to previous forecasts. Little to no energy exposure is a consensus view, but given the expected ramp back up in demand as economies recover and supply getting rammed from all sides, the sector is not without appeal. The difficulty is that the numbers are so big, and forecasting both sides of the supply and demand dynamic, in the short term, is futile. Estimates could be wrong by a magnitude of 5mb/day. Longer term, the current oil price is clearly not sustainable. There will be a squeeze. The longer prices are depressed, the more permanent the supply response will be and the tighter the squeeze will be. It’s a when, not an if. For equity investors, there will be bargains to found amongst the idle rigs and floating tankers. The hard part is the timing.