Oil prices are poised to crash to just $10 per barrel over the next six to eight years as alternative energy fuels continue to attract more and more investors, Chris Watling, chief executive of Longview Economics, told CNBC on Friday.
When looking ahead to 2018, Watling acknowledged that a key catalyst for the oil market would most likely be Saudi Aramco’s initial public offering (IPO) in the second half of next year. And when he was asked about Saudi Arabia’s state oil group being launched on the international stock market, he replied, “Well I think they need to get it away quick before oil goes to $10 (per barrel).”
While Watling explained that he did not necessarily expect such an intense decline in oil prices over the coming weeks or months, he did argue that over the long term “what happens with electric vehicles is really, really important” given that around 70 percent of oil is used for transportation.
“We forget don’t we? I mean 120 years ago the world didn’t live on oil. Oil hasn’t always driven the global economy… The point is alternative energy in some forms is gathering speed (and) things are changing,” he added.
The Longview Economics CEO forecast the price of oil would ultimately slump to $10 a barrel over the next six to eight years.
OPEC optimistic oil market rebalancing
On Thursday, the International Energy Agency (IEA) said the global outlook for oil markets in 2018 could put a dampener on hopes for higher prices. In its closely-watched report, the IEA said global stock builds, rising non-OPEC production and static oil demand could weigh on the oil price.
The IEA’s latest monthly report was published amid optimistic forecasts from the major oil producer group OPEC, with the cartel arguing there was evidence of the global oil market rebalancing following several years of low prices.
The price of oil collapsed from almost $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations — in late 2016.
Brent crude traded at around $57.39 a barrel Friday morning, up 2 percent, while U.S. crude was around $51.50 a barrel, up 1.8 percent.