If you have read the #hottakeoftheday or listened to the #htotdpodcast for the last 6 months, you knew a lot of the factors that were causing cracks in the oil market (and supported the natural gas market).

1. Oil inventories are very high around the world.
2. 65% of oil is consumed in transportation. If work from home is a thing… how could demand come back?
3. OPEC has 7 mmbo/d spare capacity, and no where to send it plus a lot of incentives to let it fail.
4. Some of the member countries are so desperate for money, with oil as one of the few exports, how could you possibly think they wouldn’t cheat?
5. China bought a lot of oil when it was cheap and doesn’t need it right now.
6. Every month for the rest of time, the U.S. will decline in oil production (and therefore associated gas) and at least 4 mmbo/d of declines are required to more appropriately balance the market. We aren’t there yet.

The result: on Monday, the Saudi’s did what you should have expected. They cut October oil prices to try to encourage demand.

On the podcast this week, Mark Rossano and I make a prediction of oil prices at year end. We both expect $35/bbl WTI.

Supply/demand. It’s a thing. In the labor force, currency markets, and oil and gas. Look out below.

#hottakeoftheday