Orn & Cie
The price of crude oil has rallied back to its 2014 level, spurred by geopolitical turmoil and supply cuts from Opec and Russia. Growing concerns in the Middle East and US-imposed sanctions on Venezuela, which is on the brink of collapse, could send prices higher.
Saudi Arabia is also believed to support artificially higher crude oil prices to boost the value of its state-owned oil company, Aramco, which had its IPO delayed because of valuation concerns.
However, sanctions and Opec cuts will not continue forever, and all eyes will now be on the Opec meeting on 22 June. There are just too many geopolitical concerns and uncertainties right now, and we don’t feel confident enough to be in the oil sector. We prefer to look for alternatives.
The transportation industry will undergo a profound transformation in the next decade, shifting from diesel- and gasoline-powered vehicles to all or partially electric. By 2040 Bloomberg New Energy Finance predicts 50% of all new vehicle sales to be electric. That alone would displace 7.3 million barrels
per day of transport fuel.
China is leading the race of the electrification of the transport industry, with more than 300,000 electric buses on the road and 600,000 electric vehicles sold in 2017 alone. All these vehicles need batteries, and batteries contain lithium, cobalt, nickel, graphite and copper, among other minerals.
As the world is shifting away from fossil-fuel-powered transportation, we think investors should pay attention to these strategic raw materials and buycompanies that benefit from this emerging trend.
The Global X Lithium & Battery Tech ETF gives investors exposure to lithiumrelated stocks. High concentration to a few names and limited exposure to cobalt, nickel, graphite and copper is a drawback.
However, we see some more interesting alternatives on the horizon that will capture this rapid disruption and would recommend investors to stay informed.