So far, there is no indication that production growth is being cut back.
Partly, that's because a good part of production is hedged; production has already been sold. Regardless: you can be sure that will change if oil has a price in the $70's for the next few months, especially, when the next earnings reports come in January.
What will happen to supply outside the U.S.? Despite signals from Saudi Arabia, some analysts believe that Saudi Arabia will likely begin to reduce its output in Q4 to avoid a price collapse.
Maybe. But it's the U.S., not Saudi Arabia, that may be the relevant marginal producer now. U.S. production this year is about 9 million barrels a day, about 10 percent of world production. More importantly, it's growing by about 1 million barrels a day each year.
So next year, the U.S. will be producing 10 million barrels a day. And it's there that production will likely be cut, because under any scenario the cost of producing in the U.S. is much higher than producing in Saudi Arabia.
What about demand? Will it increase if the global economy improves? It would and should, but remember oil is a smaller part of global GDP than it used to be, partly because of fuel efficiency. Some consumer behavior has shifted as well. In the U.S., despite lower fuel costs, the average consumer is still looking to economize because of tight paychecks.
One thing's for sure: if you get into 2015 with supply growth continuing and demand growth weak, at some point the market has to stop supply growth.
Finally, could there be a worse time to go public if you are an energy play? But that's what's happening to Shell Midstream Partners (SHLX), a Master Limited Partnership formed by Shell to operate oil pipelines (largely from Texas to Louisiana), which is set to price Tuesday night for trading Wednesday.
A lot of investors have been pouring money into MLPs, under the theory that even though energy prices are weak, these pipelines still collect a toll for the oil that passes through their pipelines and pay a handsome dividend: $0.65 a share or a 3.2 percent dividend, according to Renaissance Capital.
But that hasn't made them immune to a sell-off: the largest MLP ETF, the Alerian MLP (AMLP), dropped roughly 12 percent in a week and a half in mid-October before bouncing back.
Imagine the shock among all those investors who thought there investments were "different."