The adoption of electric vehicles (EVs) could lead to global peak oil demand as soon as 2023, which will result in oil prices crashing to $10, said Chris Watling, CEO & chief market strategist at Longview Economics.
Watling said he didn’t see oil crashing “in the next few weeks or months, or maybe even quarters, but I think the long-term outlook for oil — because of what’s happening in terms of electric vehicles” with 70 percent of oil used for transportation, is oil plummeting to $10 somewhere around 2023-2025.
“We used to talk about peak oil in terms of supply, we now need to talk about peak oil in terms of demand,” Watling added. China is on an aggressive push to EVs adoption, and the analyst thinks that “often new economies, emerging economies, adopt new technologies first, because they don’t have the old infrastructure that they have to keep servicing.”
The key catalyst for the oil market next year would be Saudi Aramco’s planned IPO — the biggest initial public offering ever — Watling agreed, and added “Well, I think they need to get it away quick before oil goes to $10.”
For next year, the International Energy Agency (IEA) expects the ongoing production gains from non-OPEC countries to probably act as a “the ceiling for aspirations of higher oil prices”, despite the fact that now everyone acknowledges that the global oil market continues to make progress toward rebalancing.
Of course, there are other views among experts and analysts, with Citi, for example, expecting tighter supply next year, regardless of what OPEC does. Several big OPEC members are already pumping at capacity, and even though some have plans to ramp up production, they may not have room for more, according to Citi’s Ed Morse, the head of the bank’s commodity research.
Oil trader Trafigura also begs to differ from the herd expecting “lower for longer” to continue for longer, or even forever. Trafigura’s co-head of group market risk, Ben Luckock, said at a presentation at the conference, as carried by the Financial Times:
“We are nearing the end of ‘lower for longer’.”
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