The problem is that the collapse in demand happened so quickly, and concurrently with significant increases in supply, that the market hasn't had a chance to catch up. The buffer between supply and demand is storage, and it's effectively full.
Edit: And I see this as a temporary (6-12 month) phenomenon. It's not the permanent death of oil (yet).
The extreme supply glut - I agree that's temporary, and I think the 6-12 month range doesn't sound unreasonable. But balance as the oil companies and nations normally think of - I don't think that's coming back.
The question for me, is what does "the permanent death of oil mean"? If we're thinking that worldwide demand for oil is heading rapidly to 0, I agree we're not there yet. But if we're talking about the financial valuation of companies in that business - I think we ARE starting in on that.
I find that I like the coal industry for a mental model of how this is going to progress.
We're at 70 or 80% of the previous market size in terms of demand. I doubt that bounces all the way back, but 90%? That doesn't sound unreasonable to me, and that is probably enough demand along with a first wave of bankruptcies and pain (and workers leaving the industry for something else), to bring back something like supply / demand balance.
That's a raw consumption point of view. The price of oil - I don't see that going back to $60/bbl. Maybe a brief spike, but as long as there are producers in the world that can make money on marginal oil at $20-30, I think this is closer to where we'll be at. Maybe $40.
So on the financial valuation side for private / public companies (as opposed to national oil co's / countries), I see the company valuations being hit hard. The coal sector is instructive - we've transitioned from a variety of public companies in the mid 00's, to a series of private companies that have improved efficiency a lot, but aren't considered good investments by the market (lending money for instance). They can get minor amounts of financing, and are effectively as valuable to their owners as the dividends they can produce. But they're pretty much out of the new coal mine building / investment business, and are into the monetize existing assets business.
And their share of the market is shrinking (24 down to 13% as of 2018). The company valuations have been effectively destroyed.
That's what I see coming to the US O&G industry. Over the next 10 years or so (say 5-20), the companies will go private (probably via bankruptcy), and will steadily convert to companies that are monetizing existing assets rather than spending significantly on new assets. The owners of those companies will be looking at their cash generation as the basis for pricing the companies (not future assets and their cash generation - primarily looking at the cash that can be generated from effectively free assets). The financial industry will have moved on from financing big capital projects in the sector (maybe to renewable energy projects, but maybe other stuff).
Energy stlll needs a lot of investment, so renewable energy and related projects (electric grid for instance) are an obvious source for new investments.
And 10 years from now, US consumption of O&G will still be 60% of today's consumption (I'm making that up, based roughly on how coal demand has been shrinking). The total demand will be a high fraction of today's demand, but the financial value of the companies providing a little or a lot of that demand will be ~0 (a rounding error compared to today's valuations).
This is the problem with capital intense industries - when demand is high and capital utilization is high, a marginal unit of demand creates a lot of incremental profit.
Meanwhile, a marginal negative unit of demand has an outsized impact on profit (moving into loss).
As an interesting sidebar, this is one of the problems tied up with the others, that I see facing the auto industry as a whole, in the transition to EV's. Small reductions in demand for their current products hit the bottom line in an outsized fashion.
