The price of oil could be up nearly 60% for the year, flirting with $120 a barrel, but Cathie Wood is doubling down on a now infamous call she made about Texas tea in 2020.
On July 15, 2020, Wood, the founder of ARK Invest and manager of the $10.7 billion ARK Innovation ETF (ARKK), tweeted that demand for oil had likely hit a secular peak the previous year, 2019, and the price of the commodity would fall back to $12 a barrel or lower, citing lows after the end of the 1973 cartel crisis .
Oil demand probably reached a secular peak last year and, thanks to #VE, is now in secular “decline”. Although the ARK has no formal forecast, I believe that #Oil prices are on their way back to $12, the level reached after the 1973 oil cartel crisis, or lower now that electric vehicles are taking off.
— Cathie Wood (@CathieDWood) July 15, 2020
At the time of his initial tweet, the first month contract for West Texas Intermediate was around $40 after a bizarre bout of volatility a few months prior when it once settled at -$37.
Today, the contract is currently at $118.46, having started the year at around $75.
Wood’s 2020 tweet has drawn attention in recent days as the price of oil, which was already climbing as the world emerged from the Covid lockdown, surged following Russia’s invasion of Ukraine in late February.
Russia is the third largest oil producer in the world, and although sanctions against the country have not limited its oil sales so far, many buyers are refusing to make purchases from Russia.
Before Covid, the world consumed almost 100 million barrels of oil per day, with Russia, Saudi Arabia and the United States being the only countries to have reached or exceeded production of 10 million barrels per day. The second largest producer was Canada, averaging less than 5 million barrels per day.
ARKK’s top position is electric car maker Tesla, which Wood believes will disrupt the auto industry and help reduce oil demand as electric cars become more widespread.
Responding to his 2020 tweet, Wood reiterated that oil demand likely reached a secular peak in 2019 and that: “The supply shock caused by the current US administration’s energy insecurity policies, mandates ESG globally, and now the Russian invasion of Ukraine has driven prices up. to a point that will accelerate the destruction of demand.
Oil demand likely reached a secular peak in 2019. The supply shock caused by the current US administration’s energy insecurity policies, global ESG mandates and now the invasion of the Ukraine by Russia have driven prices up to a point that will accelerate the destruction of demand. https://t.co/gaOKPSg7DK
— Cathie Wood (@CathieDWood) March 7, 2022
Wood said she was wrong about the supply shock, but still believed the shift to electric vehicles would reduce oil demand, albeit more slowly than she had originally expected.
ARK Innovation soared over 150% in 2020 as lockdown policies sent stocks related to the internet and other technologies and communications skyrocketing. Since then, the fund has struggled a lot, losing 23% in 2021 and another 36% this year through March 4.
Tesla is down about 20% for the year, and ARKK’s other major holdings, Teladoc and Roku, are down 27% and 47%, respectively.
Despite this, in recent weeks, investors have bought ARKK. According to Bloomberg Intelligence ETF analyst Eric Balchunas, the fund has earned $850 million in the past month, ranking in the top 30 of all ETFs during this period.
— Eric Balchunas (@EricBalchunas) March 7, 2022