{"id":114819,"date":"2017-10-16T10:32:31","date_gmt":"2017-10-16T14:32:31","guid":{"rendered":"http:\/\/countingpips.com\/?p=114819"},"modified":"2018-06-01T15:55:34","modified_gmt":"2018-06-01T15:55:34","slug":"lithium-vs-oil-an-unstoppable-divergence-in-the-energy-market","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/10\/lithium-vs-oil-an-unstoppable-divergence-in-the-energy-market\/","title":{"rendered":"Lithium vs. Oil: An Unstoppable Divergence in the Energy Market"},"content":{"rendered":"
October 16, 2017<\/div>
\r\n<\/div><\/div>

By WallStreetDaily.com<\/u><\/a> \"Lithium<\/p>\n

\"LouisLithium continues to torch oil in 2017.<\/p>\n

The Global X Lithium & Battery Tech ETF (NYSE: LIT) has been hyperbolic all year \u2014 up 57% to date.<\/p>\n

Meanwhile, the iPath S&P GSCI Crude Oil TR ETN (NYSE: OIL) is down 16%.<\/p>\n

The divergence between these two key energy commodities is shocking.<\/p>\n

See for yourself\u2026<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

\"chart:<\/p>\n

So there are two schools of thought here\u2026<\/p>\n

Old School<\/u><\/strong>: Divergences among two assets operating in the same sector \u2014 in this case energy \u2014 never last. So a profit opportunity exists as lithium and oil race back toward equilibrium.<\/p>\n

New School<\/u><\/strong>: The demand dynamics inherent to lithium are so powerful that they\u2019ve decoupled from every other energy resource. So expect lithium\u2019s divergence with oil to widen even further.<\/p>\n

So whose camp are you in?<\/p>\n

The answer to that question could put a load of money in your pocket.<\/p>\n

Our job is to make sure you\u2019re in the right camp.<\/p>\n

Supply vs. Demand<\/h2>\n

\"MartinWhen deciding which camp to fall in, it\u2019s important to note that oil and lithium are at entirely different points in their product life cycles.<\/p>\n

We have been extracting oil commercially since at least 1859. At this point, we\u2019re close to \u201cPeak Oil\u201d \u2014 when production begins to decline because of depleted reserves.<\/p>\n

Meanwhile, the world\u2019s lithium reserves are only beginning to be tapped since substantial demand for lithium has only hit recently.<\/p>\n

In other words, we\u2019re nowhere near \u201cpeak lithium.\u201d<\/p>\n

Lithium is the 25th most common element in the Earth\u2019s crust and is also substantially present in seawater, so deposits are plentiful.<\/p>\n

There are 14 million tonnes of proven reserves ready to be used, or almost 50 years\u2019 usage at 2020 production rates. And estimated reserves are at 181 million tonnes, or 600 years\u2019 usage at 2020 levels.<\/p>\n

True, some deposits are below commercially viable concentrations. But we still have considerably further to go on the \u201clearning curve\u201d of lithium extraction. So even as richer deposits are exhausted, we shouldn\u2019t see a spike in prices.<\/p>\n

With that said, demand is increasing rapidly.<\/p>\n

Global lithium production was 32,500 tonnes in 2016. But based on aggressive expansion of the electric car industry, it\u2019s expected to rise to 300,000 tonnes in 2020.<\/p>\n

And that boost in demand should give prices a boost in the immediate future.<\/p>\n

Bottom line: Rapidly increasing demand alone should push lithium prices higher in the short term. But with a plentiful supply \u2014 along with decreasing extraction costs in the coming years \u2014 lithium should trend downward long term compared with oil. Unless, of course, oil demand collapses because of political pressures.<\/p>\n

EV Boom Guarantees Lithium\u2019s Upward Trajectory<\/h2>\n

\"JonathanChange is hard for people \u2014 especially when it involves aspects of our daily lives.<\/p>\n

The era of the internal-combustion engine in automobiles is coming to a close.<\/p>\n

Fortunately for Big Oil, the ancient engine\u2019s end will be slow and painful.<\/p>\n

But nevertheless, fueled by rabid climate-conscious consumers (and governments), electric vehicles (EVs) are here to stay.<\/p>\n

In 2016 alone, U.S. EV sales jumped by an eye-popping 37%, according to Forbes.<\/p>\n

Not to mention several European countries \u2014 including the U.K. and France \u2014 have declared gas-powered engines illegal after 2040.<\/p>\n

Furthermore, Tesla Inc. (TSLA) isn\u2019t the only player in the EV game anymore.<\/p>\n

Nearly every major carmaker in the world has an EV on the market \u2014 or is working like hell to get several out.<\/p>\n

So the demand for lithium, which aptly powers electric auto engines, will only rise over the next 30 years. At the same time, oil will take a back seat.<\/p>\n

Bottom line: Expect the divergence between lithium and oil to widen even further.<\/p>\n

No Crystal Ball or Bold Prediction Required<\/h2>\n

\"LouisWe don\u2019t need a crystal ball to accurately pinpoint the next tech megatrend. The evidence is typically hiding in plain sight, whether it\u2019s patent filings, regulatory approvals, talent grabs, a string of well-coordinated and connected acquisitions, rapid advancements in technical capabilities or \u2014 as in today\u2019s case \u2014 a telltale move in prices of key \u201cbuilding block\u201d commodities\u2026<\/p>\n

We can see the growth explosion coming if we\u2019re paying close attention. And we can profit handsomely if we act before the trend becomes obvious to the rest of the world.<\/p>\n

In that regard, the time to buy into the lithium mega-trend is now! This chart says it all:<\/p>\n

\"chart:<\/p>\n

Electric vehicle (EV) sales will eclipse gas-powered cars before 2040.<\/p>\n

Mind you, that\u2019s Morgan Stanley\u2019s baseline scenario. In their more optimistic projection, which I believe is most likely, we\u2019ll cross the critical 50% threshold within 15 years.<\/p>\n

By 2045, gas-powered vehicles will essentially be dinosaurs \u2014 accounting for less than 10% of the market.<\/p>\n

Here\u2019s the key\u2026 The inevitable rise of electric cars represents a permanent shift in the market dynamics for the key transportation commodities of oil and lithium. There will be no return to equilibrium. Lithium promises to rule the future.<\/p>\n

As such, investors would be wise to scoop up the LIT ETF right away. It provides exposure to the full life cycle of EVs. From mining to refining to batteries to vehicles. The ETF is affordable, too, with an expense ratio of 0.76%.<\/p>\n

Since we first recommended it to True Alpha<\/em> subscribers, the ETF is up more than 30% and counting. But there are still years of gains ahead. Don\u2019t miss out!<\/p>\n

Click here<\/strong><\/a> for more information on elevating your Wall Street Daily <\/em>subscription with a True Alpha <\/em>membership.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese
\nChief Investment Strategist, Wall Street Daily<\/em><\/p>\n

The post Lithium vs. Oil: An Unstoppable Divergence in the Energy Market<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Lithium continues to torch oil in 2017. The Global X Lithium & Battery Tech ETF (NYSE: LIT) has been hyperbolic all year \u2014 up 57% to date. Meanwhile, the iPath S&P GSCI Crude Oil TR ETN (NYSE: OIL) is down 16%. The divergence between these two key energy commodities is shocking. See for […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-114819","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/114819","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=114819"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/114819\/revisions"}],"predecessor-version":[{"id":114837,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/114819\/revisions\/114837"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=114819"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=114819"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=114819"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}