Crude oil prices will go the way of ‘whale oil’ as demand has peaked, says ARK’s Cathie Wood

Citing U.S. Energy Information Administration data, the investment manager said global oil demand peaked at 101 million barrels per day (mbd) in 2019, dropped to 92 mbd during the coronavirus in 2020, and has since rebounded to 97 mbd in 2021. “Based on our forecast for EV sales, @ARKInvest believes that oil demand has peaked,” Wood said.

ARK has predicted that EV sales will rise roughly 20-fold from around 2.2 million in 2020 to 40 million units in 2025, and industry heavyweight Tesla TSLA, -0.03% is the biggest holding in the flagship ARK Innovation exchange-traded fund ARKK, +0.58%. She 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 U.S. CL00, -0.17% and international benchmark Brent crude oil BRN00, -0.05% 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 @ARKInvest’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.

This chart from research consulting firm Thunder Said Energy shows the rise and fall of that trade:

Of course, 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.

Read: The oil sector saw a stellar outperformance versus 10 other sectors in September.

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.

Her latest views were met with some pushback on Twitter though: