Slowing global oil demand growth and dissent over crude production policies could lead to a break-up of the OPEC+ alliance, which would send oil prices tumbling to as low as $35 per barrel, a portfolio manager at investing group Clean Energy Transition said on Thursday.
“In a declining market, time is your enemy. You have to keep cutting, keep cutting, keep cutting,” Per Lekander, managing partner at the investing group, told CNBC on Thursday.
According to Lekander, the prospect of slim, or negative, oil demand growth could dissolve the cooperation between OPEC and some dozen non-OPEC producers led by Russia—an alliance known as OPEC+ which has been managing supply to the market for nearly seven years now.
“And remember the last OPEC decision, it was really the Saudis doing it on their own … so I would say, if my forecast is correct, and I’m very sure it is … it is going to break,” Lekander told CNBC.
If the alliance breaks up, prices would slump, the portfolio manager said, noting that oil prices have been “artificially too high” since 1974.
“If the cartel can’t operate, I would say short-term you go to $35 and mid-term probably $45,” Lekander told CNBC’s program ‘Street Signs Europe’ today.
OPEC+ is currently cutting oil supply, to “stabilize the market” as it loves to say in each press release.
OPEC, at least in public, isn’t concerned about peak oil demand. It has just raised its 2023 oil demand growth estimate by 100,000 bpd compared to last month’s forecast.
In the long term, OPEC’s outlook to 2045 sees global oil demand rising to 110 million bpd by then, and oil would still represent about 29% of the energy mix in 2045.
“Global primary energy demand is forecast to increase by a significant 23% in the period up to 2045, which means we will need all forms of energy,” OPEC’s Secretary General Haitham Al Ghais said earlier this month.