As geopolitical tension in northern Iraq between Kurdistan and the central government intensifies, the price of oil has continued its resurgence following a $10 slide in June this year. On Monday, the price of Brent crude rose to a 1-month high of $58.13 as a combination of restricted supply and concerns over the impact of war on the production of oil in OPEC’s second largest producer were the key market drivers this week.
Despite the recent solid performance, traders have remained hesitant about the prospect of the current rally continuing at a similar pace, perhaps in anticipation of a reaction from US shale drillers. However, with the cartel likely to continue restricting production into next year – and if China continues to build up its oil reserves with as much aggression as it has done throughout 2017 – prices may well continue to recover from the summer slump.
If the market needed another indication that the battle for raw materials used in the production of electric vehicles was going to be highly contested, it received it on Monday. Volkswagen was shunned by cobalt miners after its attempt to secure long-term supplies of the material at a fixed price last month. So far this year, the price of the metal has jumped as much as 80% as more companies seek steady long-term supply contracts in pursuit of increasing EV production moving into the 2020s. Volkswagen, for example, has pledged to spend more than £60bn to turn 300 models electric by 2030 in a plan that targets becoming the largest producer of EVs by 2025. However, in order to do this the company would need between 80,000 and 130,000 tonnes of cobalt, yet currently just 100,000 tonnes are produced globally.
In a similar fashion to the production of lithium in the decade to come, the fundamental question will be whether producers are able to match vastly accelerating levels of demand as more companies make the transition into battery-powered vehicles. At present, the majority of the metal is produced in the Democratic Republic of Congo – a country not famous for political or economic stability – which, given UN concerns over the alleged widespread use of child labour in the production of cobalt, could act as a significant weight on the shoulders of producers.
In reports published during the middle of last week, news emerged that primary markets had continued their 2017 recovery into Q3. In Europe, roughly £7.4bn was raised, up 116% from the same period last year. In London alone, 27 IPOs produced £2.5bn in revenue as Q3 2017 saw UK primary markets’ most active third quarter since 2011, perhaps hinting that, despite the current political situation, markets are continuing to outperform expectations. With Q4 having been the strongest quarter in recent years, London could well continue a strong recovery from what had been a miserable 2016, especially with rumours of multi-billion-pound offerings coming to market before the end of the year.
While we can’t quite offer a deal of that size, we will be giving you the chance to invest in M7 Multi-let REIT’s launch onto the Main Market in November – more information coming later this week, so keep your eyes peeled!