Best Performing Commodities for the September Quarter........and...

Best Performing Commodities for the September Quarter........and the Winner is......

With Q1 2020 now in the books, CBA has run the numbers and revealed the best performing commodities in the September quarter.

LNG was the standout performer after a second-half surge, while oil was the only one of nine commodities to lose ground.

This chart summarises the relative price performance:

Source: Commonwealth Bank

Winter is coming, meaning strong demand for LNG

Looking ahead, analyst Vivek Dhar has upgraded his near-term forecasts for LNG and coking coal, but expects a structural decline in oil prices over the next years as post-COVID demand hopes fade.

Having risen by 130 per cent in the September quarter, CBA expects LNG prices to hold at around $5/mmbtu (metric million British thermal unit — a standard gas measurement) through the end of December.

At the heart of the recent rally is “the prospect of strong LNG demand during the winter months in North Asia”, Dhar said.

Coal-to-gas switching is taking place across China, South Korea and Japan, Dhar said, with LNG also making up the gap for a decline in Japanese nuclear energy production.

In addition, US supply is only just beginning to restart after bottoming out in July due to low prices and weak post-COVID demand.

“We thought it would take a little while for LNG demand to be strong enough to absorb the restart of US LNG exports. But winter demand in North Asia has proven stronger than expected,” Dhar said.