Oil and gas prices both fell this month, with LNG dropping particularly sharply, while gold and cocoa are holding their own in a tough market for commodities. Business Advantage PNG’s monthly review of Papua New Guinea’s commodity and financial markets.

The palm oil price is down 14.6 per cent for the year to date. Credit: pexels

Petroleum and gas

According to Kina Securities, West Texas Intermediate (WTI) light crude oil fell by 2.8 per cent over the month, and is down by 15.9 per cent over the year to date. It is currently trading at US$51.34 a barrel. The US Energy Information Administration expects prices to rise this year, however, and is forecasting the WTI spot price will average US$59 a barrel in 2020 and US$62 in 2021.

New global LNG production. Credit: Shell

LNG prices fell again. LNG Japan/Korea fell by 28.1 per cent over the month and is down a mammoth 45.8 per cent since the year began.

The glut in gas supply that is driving lower prices is going to dissipate eventually, according to Shell’s LNG Outlook 2020, released last week.

‘In the short-term, supply growth is expected to slow down as the last of the new LNG projects under construction will be completed by 2021, restoring equilibrium,’ it says.

Metals

Precious metals prices have continued to show strength, as investors look for safe havens in the face of stock markets affected by the coronavirus outbreak. Gold was up 4.7 per cent for the month and has risen 9.1 per cent over the year to date, according to Kina. It is currently US$1,661.70 an ounce.

The silver price also rose. It was up 3.3 per cent over the month, and is up 4.3 per cent this year so far. It is trading at US$18.69 an ounce.

Copper came off slightly. It was down 0.8 per cent over the month, according to Kina, and has fallen 7.9 per cent over the year. It is currently US$2.58 a pound.

Agriculture

Agriculture prices are proving volatile, with reduced demand from China having an effect on palm oil. Malaysian palm oil fell 11.2 per cent and is down 14.6 per cent for the year to date, priced at RM2596.00 a tonne.

The cocoa price rose this month, up 5.4 per cent for the month. It is up a healthy 13.5 per cent this year, currently priced at US$2883 a metric tonne.

On the other hand, coffee prices fell 0.7 per cent over the month to US$1.06 a pound. Coffee is down a sizeable 18.4 per cent so far this year.

Equities

Domestic stocks held their value better than dual-listed stocks in February. The KSI Home Index (PNG-listed stocks only) rose 0.1 per cent over the month to 13,155.71. It is up just 0.3 per cent for the year to date. By contrast, the KSI Index (which includes dual-listed stocks as well) fell 3.5 per cent over the month to 6014.97. It is down 4.0 per cent for the year to date.

Full-year financial reporting season is upon us in PNG, so stand by for announcements in coming weeks. This week, Oil Search announced a 8 per cent fall in profits for 2019 on the back of lower commodity prices.

The Australian All Ordinaries Index fell 1.9 per cent over the month but is still up 3.9 per cent this year. America’s S&P 500 fell 0.5 per cent this month and is down 0.2 per cent this year.

The kina was steady against the US dollar, as it has been so far this year, and sits at US$0.2935. The currency rose 3.1 per cent against the Australian dollar to AUD$0.4448 and also strengthened against the New Zealand dollar and the Japanese yen, according to Kina.

Half-year Treasury Bills are 4.7 per cent, while full-year Bills are 7.12 per cent. Four-year government inscribed stock (2018–21) is yielding 7.9 per cent.