Cathie Wooden is asking for a drop in oil costs, likening the crude market to the extinction of whale oil within the early 1900s.
“The rise in oil costs this 12 months is a perform extra of provide than demand. On the flip of the twentieth century, whale oil confronted the identical destiny and whale oil costs fluctuated dramatically. If @ARKInvest‘s analysis is appropriate, oil costs will endure the identical destiny as whale oil costs,” Wooden mentioned in a tweet Thursday night.
The worth of U.S. oil has risen sharply this 12 months as demand recovers after dropping off through the pandemic. U.S. West Texas Intermediate (WTI) crude futures sat round $74.38 a barrel on Friday, on observe to publish its sixth consecutive week of positive factors. The commodity is up greater than 53% in 2021. At one level through the begin of the pandemic, futures traded with a unfavourable worth due to the demand collapse.
Whereas many analysts and economists see the rise in oil costs as perform of elevated demand, Wooden postulates that it is because of disrupted provide. The innovation investor expects oil costs to say no simply as within the early 1900s, when whale oil costs drastically misplaced worth as different sources of gas changed it.
A lot of Wooden’s highest conviction corporations encompass applied sciences that bypass using oil. Wooden is a bull on electrical autos and battery-related corporations. Total, the widely-followed investor believes long-term deflation will return as know-how continues to disrupt many industries throughout the board.
“That mentioned, primarily based on ESG mandates, pension funds are demanding that oil corporations reduce on capital spending whereas US banks, in response to the collapse in oil costs final 12 months, are denying fracking corporations of loans for capital spending, and OPEC is holding the road on provide,” Wooden tweeted.
In the meantime, the Group of the Petroleum Exporting Nations, or OPEC, mentioned earlier this week that they suppose oil demand will proceed to develop till 2035 even with cleaner vitality sources developed as creating nations improve use of the gas. OPEC then expects demand to plateau.
— with reporting from CNBC’s Pippa Stevens.