Cathie Wood-led investment firm ARK Invest expects oil prices to drop significantly despite uncertainty over the Strait of Hormuz and U.S.-Iran tensions, citing falling demand for oil as transportation transitions to the power grid.
Oil Prices Could Drop to $30-$35 Per Barrel in the Future
In an investor release by ARK Invest on Tuesday, the firm pointed to recent International Energy Agency (IEA) projections showing global production dropping 5.7 million barrels per day (mbd) to 100.7 mbd, alongside a 2.5 mbd drop in global demand, the firm said.
ARK said that the price spike triggered by the Iran War has generated both “supply bottlenecks” and a decline in demand for oil, with electric vehicles “among the prime beneficiaries” of the fall.
The firm pointed to 1986, when rising Organization of the Petroleum Exporting Countries (OPEC) quota cheating prompted Saudi Arabia to dramatically increase production, sending oil prices down about 60%, from roughly $23 to $9 per barrel. It then said Iraq, Nigeria and Kazakhstan are currently cheating on their quotas.
ARK said that the UAE boosted production 78% from ~2.3 mbd in March to a record ~4.1 mbd in June, muting the price impact despite the Strait of Hormuz crisis after exiting the OPEC group. “During the next few years, we would not be surprised to see the oil price drop back toward ~$30-35 per barrel,” ARK said.
Transitioning to Electric Propulsion
Amid the decline in oil, countries like the UAE were betting on natural gas, as well as nuclear power, hydro and solar energy, according to the note.
ARK then said that the country could be betting on these sources to power the battery tech driving electric robotaxis like Alphabet Inc.‘s (NASDAQ:GOOGL) (NASDAQ:GOOG) Waymo and Tesla Inc. (NASDAQ:TSLA) Cybercab, autonomous trucks, drones, flying taxis, and robots.
“In other words, transportation—accounting for ~57% of global oil demand—may be transitioning to the grid,” ARK said. The firm suggested that oil reserve values may have peaked in 2008 at roughly $145 per barrel.
With prices up 50–60% from ~$60 earlier this year to $90–$100 as of September 17, oil prices could “drop precipitously once peace breaks out and the Strait [of Hormuz] opens.”
Oil and Gas prices
As tensions remain volatile, data from the American Automobile Association (AAA) showed that the national average price of gasoline on Wednesday slightly declined to $4.4744/gallon. On the other hand, the national average price of diesel also declined to $6.5217/gallon.
The West Texas Intermediate (WTI) crude futures contracts expiring in November declined 0.96% to $89.66 at press time. The Brent crude futures contracts maturing in November also declined 0.27% to $98.98 at the time of writing this article.
The ProShares Ultra Bloomberg Crude Oil (NYSE:UCO) ETF rose 0.73% to $51.00 during pre-market trading on Wednesday, while the United States Oil Fund (NYSE:USO) rose 0.01% to $144.09 during pre-market.
Trump Points to Positive Talks
Meanwhile, President Donald Trump, speaking at the United Nations General Assembly (UNGA), said that the U.S. had prevented Iran from obtaining a nuclear weapon and questioned whether Washington should reach a deal with Tehran or if he must “annihilate the Islamic Republic and do it quickly.”
The President then pointed to positive talks between the U.S. and Iran via mediators. Earlier, U.S. Special Envoy to the Middle East Steve Witkoff had pointed to “productive” meetings between the parties on the sidelines of the U.N. General Assembly.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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