Material Matters: Oil, Lithium & Iron Ore

Commodities | Sep 17 2020

A glance through the latest expert views and predictions about commodities. Oil; China oil/gas; lithium/cobalt; iron ore; and LaserBond

-Do oil reserves already exceed the sum of future consumption?
-China's oil/gas demand ramps up again
-Reasons to be more optimistic for the lithium outlook
-Iron ore price likely peaking


By Eva Brocklehurst


Is BP right about oil demand? If so, Morgan Stanley suggests this weakens arguments around the rates of decline in global oil demand. It may also change how OPEC manages the market.

BP has outlined long-term scenarios (to 2050) in which two of the three cases suggest oil reserves already exceed the sum of all future consumption. This is a softer outlook than Morgan Stanley itself had estimated.

The broker assesses, once demand recovers from the effects of the pandemic, the trend rate of growth will still be well below historical averages. Furthermore, when demand does recover, OPEC is likely to start increasing production in fear of losing market share.

The forecasts from BP amplify this prospect and, in Morgan Stanley's view, this would leave little room for non-OPEC, in particular US shale, to grow production. If these scenarios span the range of possible outcomes, the broker questions the need for oil prices to rise over the longer term.

In the BP "business as usual" scenario oil demand recovers to 2019 levels but then grows no more than 0-0.2mb/d per year until 2030 before declining, while the "rapid" and "net-zero" scenarios have demand declining exponentially from 2021.

China Oil/Gas

Macquarie observes the build up of crude oil inventory in China has slowed with the tapering of crude oil imports in August indicating healthier oil demand. The recovery has been solid, with July gasoline demand turning positive, up 8.0% compared with down -2.7% in June, and diesel demand up 21% year-on-year.

Meanwhile, demand for gas in China rebounded, as the impact of flooding subsided. However, Macquarie suspects over the year to date the 6.8% growth in apparent gas demand is largely on the back of more aggressive underground gas storage.

Hence, gas demand growth is likely to slow again in September/October before recovering in November/December once the heating season commences. LNG imports compared with total gas imports increased to an historical high of 86% in August which is likely in the broker's view the cause of Asian spot LNG prices more than doubling to US$4.55/MMBtu.


The pandemic has exacerbated high inventory levels in lithium and the continuation of market surpluses, Canaccord Genuity observes. Sustained low prices have produced significant reductions to plant capacity additions but, with signs of a pick up in demand, the broker envisages the market will be entering its nadir and a recovery is possible into 2021.

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