Much like the whale oil trade at its peak in the mid 1800s, crude oil prices have probably topped.
That’s according to Cathie Wood, founder and chief executive of Ark Investment Management, who spoke of a coming peak in crude oil prices due to the arrival of electric vehicles in a series of tweets late Thursday.
Citing US Energy Information Administration data, the investment manager said global oil demand peaked at 101 million barrels per day in 2019, dropped to 92 nillion barrels during the coronavirus in 2020, and has since rebounded to 97 million barrels in 2021.
“Based on our forecast for EV sales, [ARK] believes that oil demand has peaked,” Wood said.
ARK has predicted that EV sales will rise roughly 20-fold from around 2.2 million units in 2020 to 40 million in 2025. Industry heavyweight Tesla is the biggest holding in the flagship ARK Innovation exchange-traded fund.
Wood also pointed to pension funds who are demanding oil companies reduce capital spending while Wall Street banks are denying them money for fracking, as OPEC is “holding the line on supply”.
As for the 50% plus gains seen for US and international benchmark Brent crude oil prices this year, she describes that as “more a function of supply than demand. At the turn of the 20th century, whale oil faced the same fate and whale oil prices fluctuated dramatically. If [ARK’s] research is correct, oil prices will suffer the same fate as whale prices.”
Killing whales for their oil began in the 1700s, and the trade boomed by the mid-1800s, as the oil was used for lighting lamps and making soap, but it began to fall into decline due to the discovery of petroleum in 1859 and later electricity. The whale oil trade never recovered, ending completely by the early 20th century.
Wood’s view on oil’s demise, comes as Wall Street banks have been lifting forecasts for crude prices, with Bank of America predicting Friday that Brent could rise to $100 a barrel, amid rising natural gas prices. Crude oil futures prices were down slightly at $77 a barrel on Friday, amid a report that OPEC and its allies will discuss a further increase to global output than had been previously expected at a meeting next week.
But a day earlier, prices rose on a report that China told state-owned energy companies to build their reserves to meet power needs for the winter amid outages in that country. That’s as Europe natural gas and power prices have been surging and some expect that could feed through to higher crude oil prices.
In May, Wood predicted oil prices were unlikely to go above $70 a barrel, and in July 2020, said they were headed back to $12.
This article was published by Dow Jones Newswires