Commodities Weekly

COMMODITIES RESEARCH
1 July 2011
COMMODITIES WEEKLY
Sudakshina Unnikrishnan +44 (0) 20 7773 3797 sudakshina.unnikrishnan@barcap.com Kerri Maddock +44 (0) 20 3134 2300 kerri.maddock@barcap.com www.barcap.com
Commodity prices have rebounded slightly this week, helped by the Greek parliaments approval of the austerity measures. Oil prices have rebounded to pre-SPR levels after the initial knee-jerk reaction lower following IEA's collective action. On the other hand, the combination of bearish USDA Acreage and Quarterly Stocks reports on Thursday sent corn prices reeling, sweeping wheat and soybeans with it.
Cross-commodities
The year-to-date return of a dynamic spread trade strategy is 11.4%. The roller-coaster ride experience so far this year calls for a more-active approach; The past few weeks have been marked by a huge increase in financial market uncertainty: de-risking in commodities illustrates the extent of current concerns.
Energy
UK day-ahead NBP gas prices have remained range bound over the past month: calm before the storm?; IEAs use of SPR sets an untenable precedent in the market for the use of SPR as a means of lowering prices; Nigeria: Abuja bombing may demonstrate depth of discontent in the north; It was a wild ride the past week as EUAs fell and then fell some more ending the week some 22% lower w/w, having closed Friday at 12.26 /t; Bullish signs for US natural gas seen at the end of a long tunnel; Four months after the Libyan oil industry was first thrown into turmoil, the IEA has released oil from strategic reserves, intending it to be a partial response to the Libyan crisis; The mood of the oil market can often be quite fickle. Monthly Carbon Standard: Risk on, Risk off .
Metals
17
Base metals demand data so far from Japan show the initial negative impact of the Japanese earthquake was both shorter and less severe than expected and the spectre exists of a firm recovery in H2.
Agriculture
18
While near-term strength characterises cotton and sugar prices, we still see downside risk to front-month prices in H2.
Forecasts and data releases

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 25
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Barclays Capital | Commodities Weekly
Commodity review
After a sharp sell-off last week across most of the commodities complex, prices have rebounded slightly this week, helped by the Greek parliaments approval of the austerity measures. Oil prices have rebounded to pre-SPR levels after the initial knee-jerk reaction lower following IEA's collective action. On the other hand, the combination of bearish USDA Acreage and Quarterly Stocks reports on Thursday sent corn prices reeling, sweeping wheat and soybeans with it. Across precious metals, gold prices continue to find support from a broader positive external environment, and have sidelined seasonal weakness in demand, while silver prices have struggled to gain upward momentum owning to weak underlying supply and demand dynamics coupled with hefty ETP outflows. Base metals prices found some support from developments in Greece, however the outlook remains diverse. The past few weeks have been marked by a huge increase in financial market uncertainty. De-risking in commodities illustrates the extent of current concerns: almost $7bn was withdrawn from commodity investments in May, a level of outflow not seen since the financial crisis. Total commodity AUM experienced a large m/m decline of $26bn in May, the first decline since August 2010 and the largest since the $55bn fall in October 2008. However, we do not think this is the time to be lightening up on commodity exposure. Quite the opposite. The current combination of slowing global growth and rising CPI pressures are conditions which in previous cycles have seen commodities outperform most other assets. Moreover, a number of individual markets are exhibiting signs of increasing supplyside tightness. In the current environment, active strategies have been outperforming. In addition, as discussed in detail in our latest Commodity Investor, the already-wide range of uncertainties faced by commodity investors in 2011, can now add the condition of margin anxiety. The past few months have seen some of the biggest ever increases in margins for trading commodities and we address the subject in this month's focus. The oil market continues to look at the effects of the IEAs use of SPR. Four months after the Libyan oil industry was first thrown into turmoil, the IEA has released oil from strategic reserves, intending it to be a partial response to the Libyan crisis. The cumulative loss of Libyan output now stands at 182 mb, primarily diesel-rich light crude bound for Europe. The first IEA release is one-third of that amount, split across regions and between crude and products. After an initial fall, prices have rallied this week. The back of the curve has risen, given that the release is primarily a way of borrowing oil from the future into the present because the strategic reserves will ultimately be replaced. Overall, we see the IEA action as being well motivated, but a shot in the dark; in our view, the impact on oil politics and on market perceptions raises the danger of some significant distortions. Looking to some broader topics in the oil market, discussed in this months Oil Sketches, the global oil demand picture continues to evolve positively and, contrary to expectations in the current price environment, it is rather robust. Surprisingly, much of the scrutiny is on countries where demand is performing best, in particular the US and China. The US is showing no material weakness in price-sensitive gasoline demand and China continues to post robust y/y growth, outpacing expectations. While on the supply side, compared with the steady growth seen in 2010, non-OPEC supply growth has been more erratic and most definitely softer than initial consensus expectations. Most notably, the key issue currently plaguing non-OPEC supply growth has been the momentous decline in North Sea production since the start of the year, with both Norway and the UK currently vying with each other for the worst performer.
1 July 2011
Another topic in the oil market highlighted this week was the political situation continuing to unfold in Nigeria. The recent string of bombings in Northern Nigeria is raising new concerns about stability in the volatile oil-producing country. Boko Haram, a radical Islamist group which took responsibility for recent bombings and threatening further attacks, may be tapping into the general unhappiness with the outcome of the April elections in the north and the growing sense of political alienation in the region. Seasoned Nigeria analysts are warning that if discontent continues to fester in the north, Boko Haram could become a serious security threat to the government. While violence has been rife in the northern part of Nigeria, the oil-producing states have been relatively spared despite the regions four oilproducing states being home to scores of armed militia groups that allegedly steal crude from pipelines, sabotage the petroleum infrastructure, and kidnap oil workers in an attempt to secure a greater share of the economic and political resources. In our view, the likelihood of further sabotage to oil infrastructure remains elevated. Indeed with the level of violence in the north steady and rising, current and future performance of the Nigerian oil sector remains ultimately and intimately linked to the evolution of the structural problems affecting Nigerias oil-producing region. Any disruption to oil production will have a negative effect on federal government revenues (as oil revenues account for 80% of government revenues) and could hamper Jonathans development plans. In the latest Weekly Natural Gas Kaleidoscope, our US gas analysts presented a more bullish view on gas prices in the long run. They expect a turn lower in the gas-directed rig count, not because of gas prices, but because more lucrative oil opportunities are expected to siphon away enough rigs to alter the gas supply trajectory by H2 12. Until then, rising coal prices are expected to push the gas price floor higher. The worst of the North American gas oversupply is behind us, in our view. But bullish sentiment for 2011 is premature. Stillgrowing gas supply this year will continue to narrow the storage deficit, while continuing to displace coal in size, keeping price upside in check. US supply growth is expected to plateau and fall slightly in H2 12, when the rig count falls sufficiently next year. While far from a balanced market, lower supply dampens the need to displace coal, allowing prices to tick moderately higher. By Q4 12, we believe the market will begin pricing in a turn lower in supply. As a result, we have revised our gas price outlook for the remainder of 2011 and for 2012. For H2 11, we expect gas prices to average $4.40 per MMBtu (compared to the earlier view of $3.88). Our 2012 outlook has been revised up slightly from $4.50 to $4.55. The carbon market spent the week coming to terms with a massive sell-off towards the end of the previous week. It was a wild ride as EUAs fell and then fell some more ending the week some 22% lower w/w, having closed last Friday at 12.26 /t. By now, the root causes of the collapse have been discussed and our imaginatively titled carbon flash piece from last Thursday (Carbon Flash: EUAs falling off a cliff) set out our views. Without revisiting all of these arguments, the core one is that the great sell-off has happened against the background of the expected Q2 acceleration in trade and hedging by utilities not occurring. In light of the drastic market reactions, as presented in our latest Monthly Carbon Standard, we have updated our prices outlook. We have revised our EUA price forecasts across the board downwards by: 22% in H2 11; 29% in 2012; 23% in 2013; and 25% across phase 3. Our CER price forecasts have been revised downwards across the board by: 21% in H2 11; 25% in 2012; and 29% in 2013, narrowing our forecast EUA-CER spreads across the years. Our long-term outlooks have been written down on energy efficiency gains in Europe, which reduce the level of short-term abatement required and extend the date at which the CER import limit will need to be exhausted.
1 July 2011
Turning to the metals markets, the potential negative demand effects from the earthquake and tsunami in Japan on 11 March has been a concern for the base metal markets (Commodity Daily Briefing 29th March 2011). In fact, Japanese lead demand was the only metal in positive y/y growth territory during March-April (+7% y/y) according to preliminary ILZG data, likely supported by the need for stationary batteries for back-up power supplies as well as SLI batteries for generators. The second related point is that the average size of demand decline across the base metals in Japan (excluding lead) was 6.7% y/y March-April, which is less severe than the 10% y/y reduction we originally discounted in our forecasts. The third conclusion is that within the headline figures, there is a clear differentiation between end-demand sectors in consumption trends. Looking ahead however, statements on both a corporate and sovereign level suggest that H2 11 should see a boost to demand growth across the base metals, although potential summer power shortages are a risk. Crucially, the Japanese auto sector supply chain has made faster-thananticipated progress in restoring operations as well as resolving parts shortages, supporting a normalization in activity by Q3 from its current weakness, while reconstruction efforts from a fiscal perspective are also likely to be significantly stepped up in H2. At the start of Q2 (Commodity Daily Briefing, 12 April) we had highlighted our positive view across the agricultural complex, but had noted that we saw marked downside risk from the years highs in sugar and cotton. While cotton prices are well below the years high of $2.27/lb and sugar prices pulled back from their 2011 highs of 36.1 cents/lb to a low of 20.4 cents/lb by early May -- of late both these markets have exhibited relative strength compared with the rest of the complex. Will that endure? We continue to expect front-month prices for both to ease through H2. For cotton, we had expected production to increase in the largest producers (China, India, the US and Pakistan) but anticipated that inventories were unlikely to increase, keeping the market precariously balanced. However, dry weather in Texas is likely to result in production levels being revised down but increased rain in India bodes will for production prospects. In addition, India increased its export quota. For sugar, prices have gained on logistical bottlenecks at Thai ports and a slow start to the Brazilian crop. However, Indian acreage has expanded y/y, with farmers getting more attractive prices. With India moving further into the export side of the equation and the global market moving further into a surplus, we expect significant gains in sugar prices through H2 to be capped. Therefore, despite the recent move up, we still estimate front-month prices for both cotton and sugar to ease through H2 this year on higher supply prospects.
1 July 2011
COMMODITY SECTOR VIEWS
Energy
Oil
Oil markets have rebounded to pre-SPR levels after the initial knee-jerk reaction lower following IEA's collective action. Across the five trading days following the IEA intervention, the back of the curve has risen by more than it has depressed the front. We believe the market is now factoring in the IEA stock release with a fair degree of scepticism, with worries about the possible signals it sends beyond the immediate future now starting to affect mainstream sentiment. Especially if in the long-term the oil needs to be replaced in the SPR, therefore the release is essentially borrowing oil from the future, it has done little to alleviate market tightness for the future. Moreover, if this is viewed either as OPEC being unable to meet current demand through its capacity, or worse still, leads to reduced output from them as the consumer governments take on the role of the marginal supplier, the negative impact on prices is unlikely to have lasted for very long. Ultimately, oil market fundamentals, which remain fairly robust, will likely once again return to the forefront to buoy prices.
US natural gas
US natural gas markets were fairly steady on the week as temperature forecasts supported the market. The latest set of EIA-914 data showed growth in production of 0.7 Bcf/d from MarchApril, which should continue to keep balances relatively loose and pressure prices downward.
Coal
European coal markets traded in a narrow range over the week, with lacklustre demand and plenty of supplies supporting API2 prices at the $122/t mark. Stocks at ARA remain at elevated levels and German Rhine river levels have declined again after rising for the last two weeks; with the water levels for barging coal well below the seasonal average it is unlikely that there will be a strong pull of stocks from the ports in ARA. API4 prices settled below $120/t this week with prices set to further decline to the $115/t level, as prompt physical cargo is being offered to the Pacific Basin at discounted rates. There are indications that coal stocks in China are ample at the moment, which would see Chinese buyers showing greater resistance to higher prices. Given ample supplies and lacklustre demand in both basins, coal prices are likely to trade in a narrow range over the next two months.
Carbon
After a free fall in prices over the previous week, which saw EURs close at 12.26 /t last Friday, prices gained back some value this week, closing on Thursday at 13.53 /t, however they remain well below the 16.65 /t level seen just three weeks ago. With the key reason for the sell-off being the expected buoyant buy-side failing to materialise, it will be a big ask of prices to revert to the price levels seen in the past three months. With the market remaining structurally long, prices are likely to stand, for some time, at the bottom of the recent cliff wondering how to climb back up.
1 July 2011
Base metals
Macro concerns continue to predominate price action across the complex, although apparent progress in tackling the Greek debt crisis has offered the basis for at least a shortterm relief rally. Looking through this volatility, the supply side is shaping a more diverse fundamental picture across the base metals, and we expect this to lead to increasingly divergent price performances in H2 11. In this respect, we believe that the copper supply side is tighter than the market currently perceives, alongside signs of strengthening in Chinese demand. In our view, the Chinese market has hit a pivot point for copper: with the supply-chain inventory fully destocked, participants are turning to the SHFE and bonded warehouses. We view price dips as buying opportunities, with apparent resolutions to key macro uncertainties likely to provide traction points for such moves higher. Aluminium prices are expected to continue taking support from strong global demand growth and energy-led cost inflation and from expectations of tightening long-term energy availability. In our view, the risk/reward of being long far-dated aluminium is attractive given its relatively limited loss profile. Zinc remains our least favoured metal, with continued deterioration in the fundamentals with big stock builds, a growing market surplus and sustained production growth. We expect zinc to be the underperformer of the base metals. Finally, while the nickel supply outlook appears set to improve in H2, ongoing production disruptions and associated sustained declines in LME stock levels create the possibility of short-term upside from recent lows.
Precious metals
Prices have edged higher following the Greek parliaments approval of the austerity measures, but gold continues to find support from a broader positive external environment, and has sidelined the seasonal weakness in demand. If investor interest wanes, prices could be subject to a temporary correction before finding support from physical demand. Silver prices have struggled to gain upward momentum as weak underlying supply and demand dynamics coupled with hefty ETP outflows have trumped healthy coins demand from the retail sector. The PGMs are caught between potentially weaker supply and weaker demand. The biennial wage negotiations in South Africa highlight the potential for disruptions to mine supply over the forthcoming weeks and, in turn, pose an upside risk to prices; however, this is likely to be tempered by concerns over a slowdown in demand following the events in Japan and auto sales weakening in China.
Agriculture
The bearish USDA Acreage and Quarterly Stocks reports on Thursday sent corn prices reeling, along with wheat and soybeans. Both reports reflected bearish influences on corn - the Acreage report showed a rise in US 2011 corn plantings to 92.3mn acres, up from 92.2mn acres in March's Prospective Planting report and above market expectations. The data suggest wet weather that led to lagged plantings and delayed spring fieldwork has not shrunk US corn acreage. Soybean acres were pegged at 75.2mn acres - below both the 76.6mn acres in the Prospective Plantings report and market expectations. Spring wheat plantings at 13.6mn acres were below the 14.4mn acres in the Prospective Plantings report. So, the Acreage report was primarily bearish for corn prices, reflecting higher plantings. In contrast, the Quarterly Stocks report showed US grain stocks as of 1 June above market expectations. Corn stocks were pegged at 3.67bn bushels; soybeans at 619mn bushels and wheat at 861mn bushels. The corn figure significantly surpassed market expectations, and coupled with higher acreage, is allaying concerns of critically tight supplies and hence is likely to drive prices lower, while being positive for soybeans for 2011-12. Weather conditions in the US will be keenly watched to see whether this additional supply materialises but for now, the corn market is likely to come under further pressure after Thursday's bearish reports.
1 July 2011 6
CROSS COMMODITIES
Who said get out of commodities? The year-to-date return of a dynamic spread trade strategy is 11.4%. The roller-coaster ride experience so far this year calls for a more-active approach
This article is an excerpt from the Commodity Daily Briefing, 30 June 2011. It has been a difficult few weeks for commodity players, with macroeconomic uncertainty settling over the markets and driving the pulse of investors. Amid this uncertainty we thought we would highlight one figure to cheer up the mood of commodity market participants: 11.4%. This is the year-to-date return of a dynamic spread-trade strategy that captures the outperformance from going long an alpha strategy based on holding and rolling forward futures contracts selected according to momentum of historical outperformance, and going short the corresponding nearby contract (see table below). This strategy is based on seeking outperformance through a dynamic commodity curve positioning process by gaining exposure to the point on the commodity term structure with the highest alpha (for more details on these dynamic strategies see Commodity Cross Currents: The Commodification of Alpha, 25 May 2011). Moreover, in these times of high price volatility, an average 0.2% standard deviation year-to-date looks quite impressive, and more so a Sharpe ratio of 3.07. Directionally neutral spread strategies have also outperformed this year, in an environment of diverging returns by commodity sector, reflecting the relevance of a dynamic approach by shifting exposure to different points on the curve according to each individual commoditys own fundamental picture. The first generation of passive long-only commodity indices were created in the 1990s, when commodities first became investible. But over the past decade, the growth in investment flows into commodities has gone hand in hand with an increasing demand from investors for new, more-active approaches to obtaining exposure to the asset class. The traditional argument for passive long-only index investors has been that they provide investors with inexpensive long exposure to a range of commodities. However, this comes at the cost of a high volatility and a fixed weighting in the portfolio. In contrast, alpha, defined as actively managed exposure to commodities with the flexibility to take long, short, neutral or spread positions, enables investors to take advantage of opportunities on both the long and short side, as well as the ability to deploy relative value or niche strategies. Increasingly, experienced and would-be commodity investors are seeking to know how best to capture alpha in the context of highly volatile commodity markets. The roller-coaster ride experienced over the past decade calls for the design of new-generation dynamic trading strategies that perform well in both up and down markets.
Figure 1: Time for dynamic commodity strategies

Year-to-date statistics Commodities Dynamic spread trade Dynamic long-only Dynamic long-short S&PGSCI DJ-UBS Equities S&P500 Annualized returns 11.4% 2.8% 0.0% -3.4% -9.6% 3.3% Standard Deviation 0.2% 1.1% 0.7% 1.4% 1.1% 0.8% Sharpe Ratio Correlation with S&P500 6% 47% 46% 32% 41% 100%
3.07 0.24 0.03 -0.01 -0.49 0.50
Note: The strategies in this table are a weighted average of baskets of indices that can be categorized in this distinct way. Source: Ecowin, Barclays Capital
1 July 2011
CROSS COMMODITIES
High anxiety
This article is an excerpt from the Commodity Investor, 30 June 2011. The past few weeks have been marked by a huge increase in financial market uncertainty. De-risking in commodities illustrates the extent of current concerns: almost $7bn was withdrawn from commodity investments in May, a level of outflow not seen since the financial crisis. Total commodity AUM experienced a large m/m decline of $26bn in May, the first decline since August 2010 and the largest since the $55bn fall in October 2008. However, we do not think this is the time to be lightening up on commodity exposure. Quite the opposite. The current combination of slowing global growth and rising CPI pressures are conditions which in previous cycles have seen commodities outperform most other assets. Moreover, a number of individual markets are exhibiting signs of increasing supply-side tightness. In the current environment, active strategies have been outperforming. Spread trading index strategies appear to be particularly well suited to the current environment, with returns in the 11% region in the year-to-date, compared with a negative 3% for the S&PGSCI. Active long-only strategies are also performing well, up by around 3% so far this year. To the already wide range of uncertainties faced by commodity investors in 2011, we can now add the condition of margin anxiety. The past few months have seen some of the biggest ever increases in margins for trading commodities and we address the subject in this month's focus.
Figure 2: May saw the first outflow from commodity investments since August last year
20 15 10 5 0 -5 -10 Jan-09 Monthly inflows into commodities (Indices, ETP, MTNs, $bn)
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital
1 July 2011
ENERGY
UK day-ahead NBP gas prices have remained range bound over the past month: calm before the storm?
This article is an excerpt from the Commodity Daily Briefing, 24 June 2011. Despite a drastic fall off across much of the European energy complex in recent days, UK gas prices have remained remarkably range bound for the past month, almost to the point of boredom. Prompt prices have traded in a range of just 3p over the past 20 days, compared with 10p over this same period last year. Is this the status quo for the rest of the summer or just the calm before the storm? We see the lack of volatility in the gas market as a short-term reality. As the global gas glut continues to come to an end, UK gas prices will need to not only increase but will become much more sensitive to changes in flows. While we expect LNG intakes throughout the summer to be higher than last year (with daily flows averaging 87 mcm/d so far this summer compared with 44 mcm/d last summer), we expect the global LNG market to become significantly tighter come Q4 11 with the possibility of cargos starting to be diverted out of Europe. By 2012 Europe will need to lose about 9 bcm of LNG cargos compared with 2011 to keep the global market balanced. With LNG cargos heading east, UK production declining and Norwegian flows remaining extremely volatile, UK gas prices will need to increase. Before the affects of a tighter LNG market takes its hold on the UK gas prices, however, we need to get through the rest of the summer, where we expect prices to first drift downwards. Strong LNG intakes and record high storage levels should add downward pressure. In addition, already low demand for gas from power generators will be increasingly hampered by the latest dive in carbon prices. With carbon prices losing 20% in value in the past 7 trading days, this will help push coal-fired plants further into the money. So far this year, gas generators have demanded an average of 62 mcm/d of gas from the grid for power generation, compared with 84 mcm/d over the same period last year. Last year, for the remainder of the summer, demand was 72 mcm/d and, given coal and carbon prices, it is likely to be lower this year. In Q3 this should help to limit upside pressure if any LNG tankers are diverted out of the UK. Overall, the downward pressures in the near term, coupled with the upward pressures in the longer term, should increase volatility in the UK gas market throughout the rest of the year.
Figure 3: A very subdued prompt NBP over the past month

15 10 5 0 -5 -10 -15 -20 20 May
Source: Ecowin, Barclays Capital
2011
2010
2009
2008
30 May
09 Jun
19 Jun
1 July 2011
ENERGY
IEAs use of SPR is likely to provide very little incentive to change consumer behaviour through higher prices in the long run, while it sets an untenable precedent in the market for the use of SPR as a means of lowering prices
This article is an excerpt from the Commodity Daily Briefing, 29 June 2011. Just as the fundamentals were set to take centre stage in Q3 with large stock draws the only way to balance the market, the IEA took on the role of the marginal supplier, unleashing the equivalent of QE2 in the oil market through 60 mb of light sweet crude from its SPR, but without any definitive end date for its programme. That sent the whole market clamouring to adjust inventory estimates for the balance of 2011, the key metric that had signalled a tightening market in H2 11. No doubt the availability of crude should improve materially at least in parts of Q3, thereby covering for a large part of the stock draws implied in our and consensus balances, and this will clearly have (and is already having) a significant negative short-term impact on prices and curve shapes. But beyond Q3, and perhaps even the rest of this year, IEAs actions may ultimately have severe unintended consequences. The reality remains that the current market is still grappling with a structural change that has effectively resulted in the gain of some five years of oil demand in one year. Indeed, just two years ago, the IEA provided two scenarios for demand developments a high-GDP case when the next time a new annual record was expected was 2012, and a low-GDP scenario when the 2007 level was not regained till 2014. Not only did we surpass 2007 peaks in 2010, we added a further 1.7 mb/d, equivalent to a years annual growth level. Such a uniformly strong demand backdrop pitted against a non-OPEC supply picture, which is still struggling beyond a few pockets of strength, requires a constructive consumer-producer relationship at the very least to address the long-term issues of this growing mismatch and its impact on prices. Latent threats in statements, public retaliation through the media, encroaching on each others duties and roles in the market simply does not bode well for the long-term prospects for stability in the oil market. The IEA has done exactly what it did not want to do its actions could ultimately dry up OPEC volumes, warranting even larger stock draws once the SPR release stops. The IEAs rationale to lower oil prices in order to support economic growth is flawed at several levels, we believe, not least due to the fact that stronger macroeconomic growth is perhaps the biggest catalyst for higher oil demand growth and hence higher oil prices. A form of economic intervention, IEAs actions are likely to be fraught with the laws of unintended consequences. Indeed, in a world where both supply and demand responses are becoming more inelastic in nature, prices have to play a large role in helping to allocate resources efficiently. This involves not just incentivising new (costlier) supplies to come onstream but also to ration a level of demand. Given the limited opportunities for substitution out of oil in transportation in the near term, the importance of sending the correct price signal to encourage long-term substitutability through R&D and market incentives is paramount. The IEAs intervention is likely to provide very little incentive, we believe, if any at all, to change consumer behaviour or encourage alternatives. In our view, it sets an untenable precedent in the market for the use of SPR as a means of lowering prices (irrespective of supply outages). Worse still, emerging market economies are often criticised for not allowing their consumers to face the true price of oil through heavy subsidies, thereby keeping demand inflated. We fear the IEA has done exactly the same in the OECD now.
1 July 2011
10
ENERGY
Nigeria: Abuja bombing may demonstrate depth of discontent in the north

This article is an excerpt from the Geopolitical Update, 24 June 2011. The recent string of bombings in Northern Nigeria is raising new concerns about stability in the volatile oil-producing country. Eight people were killed last week in a car bomb attack outside the national police headquarters in the capital Abuja. The radical Islamist group Boko Haram claimed responsibility for the Abuja bombing and warned that it will carry out more attacks in the coming weeks. Boko Haram, which campaigns against western education and has called for the adoption of Sharia law in all of Nigerias 36 states, rose to prominence in the summer of 2009. Clashes between its followers and security officials in 2009 left more than 700 people dead. Boko Haram may be now tapping into the general unhappiness with the outcome of the April elections in the north and the growing sense of political alienation in the region. Seasoned Nigeria analysts are warning that if discontent continues to fester in the north, Boko Haram could become a serious security threat to the government. While violence has been rife in the northern part of Nigeria, the oil-producing states have been relatively spared despite the regions four oil-producing states being home to scores of armed militia groups that steal crude from pipelines, sabotage the petroleum infrastructure, and kidnap oil workers in an attempt to secure a greater share of the economic and political resources. In our view, the likelihood of further sabotage to oil infrastructure remains elevated. Indeed with the level of violence in the north steady and rising, current and future performance of the Nigerian oil sector remains ultimately and intimately linked to the evolution of the structural problems affecting Nigerias oil-producing region. Any disruption to oil production will have a negative effect on federal government revenues (as oil revenues account for 80% of government revenues) and could hamper Jonathans development plans. Although the worst of the post-election violence has dissipated and markets have calmed, the risk of violence spilling over to the fragile Niger Delta remains. Any disruption to oil production will have a negative effect on federal government revenues (as oil revenues account for 80% of government revenues) and could hamper Jonathans development plans. Moreover, following Central Bank of Nigeria Governor Sanusis announcement of the planned lifting on July 1 of the one-year holding requirement that foreign investors were subjected to when holding domestic bonds, it means that financial markets will be more open and hence more susceptible to outflows in case of any threat to the economy. That said, the lifting of the limit will only pertain for new inflows after July 1, suggesting that at least over the medium term, this risk is limited. Nonetheless, any evidence of violence may increase investor uncertainty and put downward pressure on financial markets and particularly the currency (as was evidenced by the rapid weakening of the NGN ahead of the April elections). The good news is that if Jonathan succeeds in maintaining stability in the Niger Delta (and in the north), the economic benefits in terms of achieving sustainable growth may be substantial.
1 July 2011
11
ENERGY
Avalanche
This article is an excerpt from the Weekly Carbon and Energy Matters, 27 June 2011. It was a wild ride this last week as EUAs fell and then fell some more ending the week some 22% lower w/w, having closed Friday at 12.26 /t. By now, the root causes of the collapse have been discussed and our imaginatively titled carbon flash piece from last Thursday (Carbon Flash: EUAs falling off a cliff) set out our views. Without revisiting all of these arguments, the core one is that the great sell-off has happened against the background of the expected Q2 acceleration in trade and hedging by utilities not occurring. This does not mean the utilities have not been on the buy-side, indeed it is difficult to imagine who else has been buying carbon on its way down. Rather, it is that length was built up on the anticipation that the surge in hedging activity and pricing was coming, and this just did not materialise. So, with the utilities not ramping up hedging, the prospects for EUA price upside this year looked off and with some triggers for selling all going off together, the market started to fall and went straight through key levels 16, 15, 14, 13 and then briefly 12 /t. One question is just how important were fears over the Greek debt crisis in this sell-off? Well, the idea that industrial length was first into the market on what remains a very uncertain and complex outcome seems unlikely. Rather, for this to be a trigger, there would have to be: significant length held by non-compliance participants; a concentrated intent to de-risk the holdings of this asset given an overarching desire to remove all exposure to Europe; and selling done with complete disregard for the impact on prices. Oddly enough, this scenario cannot be discounted as it would at least help explain the sudden and unexpected drop through so many levels. On the way down, of course, stop losses would be triggered and other participants with length (including the industrials) will see that fall and may jump on that bandwagon and try quickly to monetise their length. The result is a price avalanche, which tells us that even flat peaks can be dangerous (it also tells us there are no free floors, to mix metaphors). Now do the fundamentals still support higher prices? A good question but the short-term fundamentals are one of a market with too much length. The only upside to prices was going to be the impact of accelerated utility buying. Without that, prices will find it a long, long, long way up. Figure 4: EUA and CER prices (/t)
19 17 15 13 11 9 7 5 3 1 -1 Feb-11
Mar-11 EUA Front year (/t)
Apr-11
May-11
Jun-11 EUA-CER spread
sCER Front Year (/t)
Source: Barclays Capital
1 July 2011
12
ENERGY
Bullish signs at the end of a long tunnel

This article is an excerpt from the Natural Gas Weekly Kaleidoscope, 28 June 2011. The good news for those waiting for higher U.S. natural gas prices is that we believe there is a supportive factor emerging. The bad news is they are going to have to wait. We expect a turn lower in the gas-directed rig count, not because of gas prices, but because more lucrative oil opportunities are expected to siphon away enough rigs to alter the gas supply trajectory by H2 12. Until then, rising coal prices are expected to push the gas price floor higher. The worst of the North American gas oversupply is behind us, in our view. But bullish sentiments for 2011 are premature. Still-growing gas supply this year will continue to narrow the storage deficit, while continuing to displace coal in size, keeping price upside in check. U.S. supply growth is expected to plateau and fall slightly in H2 12 when the rig count falls sufficiently next year. While far from a balanced market, lower supply dampens the need to displace coal, allowing price to tick moderately higher. By Q4 12, we believe the market will begin pricing in a turn lower in supply. As a result, we revise our gas price outlook for the remainder of 2011 and for 2012. For H2 11, we expect gas prices to average $4.40 per MMBtu (compared to our earlier view of $3.88). We revise our 2012 outlook up slightly from $4.50 to $4.55.
Figure 5: New Barclays Capital U.S. gas price outlook, $/MMBtu

Previous forecast 2011 Q1 Q2 Q3 Q4 2012 Q1 Q2 Q3 Q4 2015
* Actual to date. Source: Platts, Barclays Capital
New forecast/actual 4.35 4.20 4.38* 4.30 4.50 4.55 4.50 4.40 4.40 4.90
3.94 4.25 3.75 3.75 4.00 4.50
5.25
5.25
We revisit our U.S. natural gas price outlook after just completing a ground-up readjustment of our balances. We introduce 2012 balances in this Kaleidoscope and also reveal some lessons learned from a recent back-casting exercise. The aggregate changes are not individually large, but together point to a tightening of the market big enough to prompt an upwards revision to our price outlook, with price momentum appearing at the end of 2012.
1 July 2011
13
ENERGY
IEA: A shot in the dark

This article is an excerpt from the Weekly Oil Data Review, 29 June 2011. Four months after the Libyan oil industry was first thrown into turmoil, the IEA has released oil from strategic reserves intending it to be a partial response to the Libyan crisis. The cumulative loss of Libyan output now stands at 182 mb, primarily diesel-rich light crude bound for Europe. The first IEA release is one-third of that amount, split across regions and between crude and products. After an initial fall, prices have rallied. The back of the curve has risen, given that the release is primarily a way of borrowing oil from the future into the present because the strategic reserves will ultimately be replaced. Overall, we see the IEA action as being well motivated, but a shot in the dark; in our view, the impact on oil politics and on market perceptions raises the danger of some significant distortions. The long and sustained whittling away of surplus commercial inventory has continued. The overhang of US crude oil and oil product inventories above their five-year average has fallen by a further 4.1 mb in the latest US weekly data release, and now stands only 1.3 mb above a 30-month low.
Figure 6: US Department of Energy weekly data summary (mb)

1 we e k c ha nge 4 we e k c ha nge 1 ye a r c ha nge dif f e re nc e f ro m 5 - ye a r a v e ra ge
24 Jun 2011 Crude oil Gasoline Total distillate Heating oil Diesel Jet kerosene Residual fuel oil Unfinished oils Other oils Total commercial inventories
Source: US Department of Energy
inv e nt o rie s
359.47 213.17 142.25 33.50 108.76 43.88 38.37 86.78 181.15 1065.08
-4.38 -1.43 0.26 -0.15 0.41 1.15 0.73 0.03 3.31 -0.32
-14.34 0.89 2.14 1.57 0.57 3.77 0.39 1.02 9.77 3.63
-3.6 -4.9 -17.1 -13.2 -4.0 -2.7 -5.0 7.3 -9.9 -36.1
16.8 3.0 6.7 -5.6 12.4 2.2 -1.3 -0.3 -10.7 16.4
So it happened. The idea that strategic oil reserves might get released at some point has been an overt theme throughout 2011. The US government was fairly overt at an early stage that there were some red lines when it came to price response, particularly in retail gasoline, that would likely occasion some action. Likewise, the not-completely-temperate press release from the International Energy Agency (IEA) before the last OPEC meeting was only a slightly veiled threat about the use of strategic reserves. That press release of 19 May said The Governing Board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply. We stand ready to work with producers as well as non-member consumers; in this constructive spirit, we are prepared to consider using all tools that are at the disposal of IEA member countries. Given that background, the appearance of strategic reserves is not a surprise in itself. However, in terms of its timing and its motivation, the market did appear surprised by the initial reality of the release, and then surprised again as it became clear that the release was not in itself a universal panacea to the ills of the world.
1 July 2011 14
ENERGY
Registering efficiency
This article is an excerpt from Oil Sketches, 27 June 2011. The mood of the oil market can often be quite fickle. Just when it had started to get uninteresting steady growth, tightening oil market fundamentals, widespread entrenched geopolitical risks sovereign debt contagion fears grabbed its attention. The Greek crisis on its own could not make a significant difference to oil market balances, but the issues look scary enough for the oil market to play along for a while. Then, as the fundamentals were set to take centre stage in Q3 with large stock draws, the only way to balance the market, the IEA took on the role of the marginal supplier, unleashing the equivalent of QE2 in the oil market through 60 mb of light, sweet crude from its SPR, but without any definitive end date for its programme. That sent the whole market clamouring to adjust inventory estimates for the balance of 2011, the key metric that had signalled a tightening market in H2 11. No doubt, the availability of crude should improve materially at least in parts of Q3, thereby covering for a large part of the stock draws implied in our and consensus balances, and this will clearly have (and is already having) a significant negative short-term impact on prices and curve shapes. But beyond Q3, and perhaps even the rest of this year, these issues (be it sovereign debt risk or IEAs SPR release) bear little meaning for the long-term fundamentals of the market. The reality remains that the current market is still grappling with a structural change that has effectively resulted in the gain of some five years of oil demand in one year. Indeed, just two years ago, the IEA (used here as a barometer for consensus expectations) provided two scenarios for demand developments a high-GDP case when the next time a new annual record was expected was 2012, and a low-GDP scenario when the 2007 level was not regained till 2014. Not only did we surpass 2007 peaks in 2010, we added a further 1.7 mb/d, equivalent to a years annual growth level. Such a uniformly strong demand backdrop pitted against a non-OPEC supply picture, which is still struggling at large beyond a few pockets of strength, requires a constructive consumer-producer relationship at the very least to address the long-term issues of this growing mismatch and its impact on prices. Latent threats in statements, public retaliation through the media, encroaching on each others duties and roles in the market simply does not bode well for the long-term prospects of stability in the oil market. The IEA has done exactly what it did not want to do its actions could ultimately dry up OPEC volumes, warranting even larger stock draws once the SPR release stops. Rather than letting the market decide on long-term resource allocation (eg higher oil price eventually encouraging the switch away to cheaper fuels), the IEAs intervention is likely to do little to address the long-term issues of the market, instead keeping oil demand high and discouraging substitution as a result.
1 July 2011
15
ENERGY
Risk on, Risk off

This article is an excerpt from the Monthly Carbon Standard, 20 June 2011. After the price events (realignment, correction, catastrophe) of the past couple of weeks have left EUA prices languishing around the 13 /t level, the question is: where to from here? The answer is likely to be not too far from where we are now. The realignment in our views that started last month continues for the same reason: the acceleration of carbon trading due to the bigger buying requirements of utilities in 2013 has failed to materialise in 2011. We believe there are a number of good incentives for utilities to delay more significant hedging of the 2013 positions to next year, including greater EUA supply (from the NER 300) and the potential for power spreads to increase further after the last free allocation to heat and power in February 2012. Utilities potentially holding higher open positions into 2013 and only closing these closer to the period of generation push price upside further into the future. How far? Well, we expect the answer to be 2013 for a number of reasons. First, if spark and dark spreads do improve further in 2012, then by 2013 the pressure from shareholders on utilities to lock in better spreads will be greater and the utilities will be back hedging out more power at Y+1 and Y+2. Second, the supply of EUAs will contract from 2012 as the caps will be lower, industrials will likely be short, and the cap could be reduced by a further 60 Mt if the EC sells 120 Mt of early volumes in 2012. If the set aside is functioning, this reduction in cap could be even more pronounced. Third, the supply of CERs in the market will contract as the qualitative restrictions on industrial gas CERs are imposed. So, the price upside originally expected for 2011 has definitely been delayed, but not indefinitely. The main risk to this is the unknown effect of the Greek debt crisis. Our macroeconomists remain confident that it will not be a full-scale credit crisis and have maintained their prospects for European GDP at 2.1% y/y. While this is one outcome, there are many potential paths this event may take, and it certainly poses risks. The energy efficiency directive that now is in the co-decision process has caused us to alter our phase 3 supply demand balance as the obligation on energy suppliers to reduce energy supplied by 1.5% will likely start to take effect from 2014. This reduces our long term phase 3 price outlook because it makes the period 2013-20 likely to be net long allowances, yet it is likely to have little effect on current prices. We have revised our EUA and CER price forecasts down across the board.
Figure 7: Phase 2 (front year) (/t CO2) ups and downs

30 25 20 15 10 5 0 Jan-08 Apr-08 Jan-09 Apr-09 Jan-10 Apr-10 Jan-11 Apr-11
16
EUA front year sCER front year EUA-CER spread
Oct-08
Oct-09
Source: ECX, Barclays Capital
1 July 2011
Oct-10
Jul-08
Jul-09
Jul-10
METALS
Base metals demand data so far from Japan shows the initial negative impact was both shorter and less severe than expected and the spectre of a firm recovery in H2 is in place
This article is an excerpt from the Commodity Daily Briefing, 28 June 2011. The potential negative demand effects from the earthquake and tsunami in Japan on 11 March has been a concern for the base metal markets (Commodity Daily Briefing 29th March 2011). This morning saw the release of demand data for aluminium for May, which together with other data spanning the April/May period for the metals makes it possible to provide some early observations on the short-term domestic demand effects versus initial expectations. First, initial expectations on the directional impact on demand performance were correct. Japanese lead demand was the only metal in positive y/y growth territory during March-April (+7% y/y) according to preliminary ILZG data, likely supported by the need for stationary batteries for backup power supplies as well as SLI batteries for generators. The second related point is that the average size of demand decline across the base metals in Japan (excluding lead) was 6.7% y/y March-April, which is less severe than the 10% y/y reduction we originally discounted in our forecasts. The third conclusion is that within the headline figures, there is a clear differentiation between end-demand sectors in consumption trends. We can see this in the breakdown offered in the Japanese copper and wire cable data, which in May showed shipments rising by 18% y/y to the construction sector, versus a 21% y/y decline to the auto sector. This correlates well with data from end-use sectors. The Japan Automobile Manufacturers Association stated that production of cars, trucks and buses in Japan fell by 60% y/y in April, while conversely, Japanese government data showed construction orders rising 31% y/y during them same month, boosted by the ongoing build-out of 70k temporary housing units in the most devastated prefectures. The final point is that forward-looking statements on both a corporate and sovereign level suggest that H2 2011 should see a boost to demand growth across the base metals, though potential summer power shortages are a risk. Crucially, the Japanese auto sector supply chain has made faster-thananticipated progress in restoring operations as well as resolving parts shortages, supporting a normalization in activity by Q3 from its current weakness, while reconstruction efforts from a fiscal perspective are also likely to be significantly stepped up in H2.
Figure 8: Only lead demand did not fall in the immediate aftermath of the Japan earthquake
Year-on-year change in Japan base metals demand indicators (March to April 2011 for lead, nickel and zinc and March to May for copper and aluminium) 8% y/y 4% 0% -4% -8% -12% Zinc Nickel Aluminium Copper Lead
Source: ILZSG, INSG, JWCMA, JAA, Barclays Capital
1 July 2011
17
AGRICULTURE
While near-term strength characterises cotton and sugar prices, we continue to view front-month prices with downside risk through H2
This article is an excerpt from the Commodity Daily Briefing, 27 June 2011. As Q2 draws to a close, price moves across the agricultural complex have been volatile and choppy, declining from the years highs so far, with the current environment characterised by macro-economic concerns, a firmer dollar, widespread risk reduction and more benign weather conditions. At the start of Q2 (Commodity Daily Briefing, 12 April) we had highlighted our positive view across the agricultural complex but had noted that we saw marked downside risk from the years highs in sugar and cotton. While this did turn out to be the case -- cotton prices are well below the years high of $2.27/lb and sugar prices pulled back from their 2011 highs of 36.1 cents/lb to a low of 20.4 cents/lb by early May -of late both these markets have exhibited relative strength compared to the rest of the complex. Will that endure? We continue to expect front-month prices for both to ease through H2. For cotton, we had expected increased production across the worlds four largest producers -- China, India, the US and Pakistan although noting that inventories were unlikely to increase despite higher production, which would keep the market precariously balanced. The big change here has been the US where, despite higher plantings, dry weather in the largest producing state -- Texas --is likely to be revised lower further. However, the recent pick-up in Indias Monsoon rains, coupled with a surge in plantings, bodes well for production prospects from the worlds second largest producer. Earlier this month, India increased its 5.5mn bale cotton export quota for 2010-11 by another million bales, while for the 2011-12 crop, the countrys agriculture ministry data showed farmers having a strong preference for planting cotton. For sugar, prices have gained on logistical bottlenecks at Thai ports and a slow start to the Brazilian crop. However, again here Indian acreage has expanded y/y with farmers getting more attractive prices while the government last week gave the go-ahead for another 500Kt of OGL sugar exports. With India moving further into the export side of the equation and the global market moving further into a surplus, we see significant gains in sugar prices through H2 as being capped. Therefore, despite the recent move up, we continue to expect front-month prices for both cotton and sugar to ease through H2 this year on higher supply prospects. Figure 9: In contrast to the rest of the complex, sugar and cotton prices move higher
160 150 140 130 120 110 100 90 80 70 60 Jan-11 Prices are indexed to Jan 2011 Corn Coffee Wheat Sugar Soybeans Cotton Cocoa
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Source: Ecowin, Barclays Capital
1 July 2011
18
FORECASTS AND DATA RELEASES
Commodity price comparisons

Commodity Coffee Gasoline Cocoa Nickel Heating Oil Lead Copper Carbon CER Crude Oil Gas Oil Lumber Zinc Crude Oil US Natural Gas Freight Capesize C4 Tin Aluminium Alloy Sugar Palladium Coal API2 Platinum Rough Rice Carbon EUA Barley Coal API4 Aluminium Live Cattle Feeder Cattle Carbon Silver UK Power Soybeans UK Natural Gas Gold Rubber Azuki Beans Lean Hogs Cotton Oats German Power Corn Wheat Wheat
Price Change (%, Thurs/Thurs) ICE NYMEX ICE LME NYMEX LME LME ECX NYMEX ICE CME LME ICE NYMEX OTC LME LME ICE NYMEX ICE NYMEX CBOT ECX WCE ICE LME CME CME ICE OTC APX CBOT ICE OTC Tocom TGE CME ICE CBOT EEX CBOT KBOT CBOT $/lb $/gallon $/tonne $/tonne $/gallon $/tonne $/tonne Euro/tonne $/barrel $/tonne $/1000 ft $/tonne $/barrel $/mmbtu $/tonne $/tonne $/tonne $/lb $/oz $/tonne $/oz $/bushel Euro/tonne C$/tonne $/tonne $/tonne $/lb $/lb $/tonne $/oz Euro/MWh $/bushel /therm $/oz Y/kg JPY/30kg $/lb $/lb $/bushel Euro/MWh $/bushel $/bushel $/bushel 7.1% 6.9% 6.2% 5.9% 5.5% 5.4% 5.2% 5.1% 4.8% 4.8% 4.7% 4.6% 4.6% 4.2% 4.0% 3.4% 2.9% 2.8% 2.3% 2.0% 1.8% 1.4% 1.2% 1.0% 0.9% 0.9% 0.4% 0.2% -0.5% -0.5% -0.8% -0.9% -0.9% -1.1% -1.5% -1.7% -2.7% -2.9% -4.2% -6.8% -7.6% -9.4% -9.9%
30-Jun-11 2.65 3.04 3,170 23,427 2.94 2,688 9,430 11.0 95.46 926.3 244.9 2,365 112.40 4.37 10.3 26,050 2,394 0.28 760.1 123.2 1,723 13.9 13.5 207.0 119.8 2,531 1.13 1.38 23.71 34.82 49.7 13.06 0.6 1,502.4 372.4 12,040 0.94 1.60 3.3 50.0 6.29 6.89 5.85
Week Price Change Ago Price (%, M/M) 2.48 2.84 2,986 22,128 2.78 2,551 8,960 10.45 91.08 883.8 234.00 2,260 107.43 4.20 9.90 25,200 2,325 0.28 742.8 120.75 1,693 13.70 13.37 205.00 118.75 2,509 1.12 1.38 23.83 35.01 50.10 13.18 0.64 1,519.7 377.90 12,250 0.97 1.65 3.49 53.65 6.81 7.60 6.49 0.3% -2.9% 5.7% -0.7% -3.9% 6.5% 2.3% -15.0% -7.0% -3.5% 0.6% 4.4% -3.7% -6.1% 4.6% -6.8% 0.2% 22.3% -2.8% 0.1% -5.9% -7.8% -20.4% 1.0% -0.3% -5.3% 26.6% 11.0% 11.0% -9.2% -2.6% -5.1% -4.9% -2.2% -11.6% -2.0% 4.7% 0.7% -13.5% -8.9% -15.9% -24.1% -25.2%
Month AgoPrice Change Price (%, Y/Y) 2.65 3.13 2,999 23,596 3.06 2,524 9,215 12.9 102.68 959.7 243.5 2,266 116.73 4.66 9.9 27,940 2,389 0.23 782.0 123.1 1,832 15.1 17.0 205.0 120.2 2,673 0.89 1.24 21.36 38.33 51.1 13.76 0.7 1,535.9 421.4 12,290 0.90 1.59 3.9 54.9 7.48 9.08 7.82 61.6% 46.9% 9.5% 18.7% 48.2% 53.9% 44.7% -15.6% 26.3% 44.1% 25.6% 31.9% 49.9% -5.2% -20.8% 49.5% 26.2% 57.3% 71.2% 29.3% 12.4% 47.2% -11.3% 24.7% 30.6% 28.2% 24% 22.1% 32.0% 86.4% 14.5% 37.7% 13.6% 20.7% 8.6% 8.0% 19.2% 93.5% 31.0% 1.5% 77.6% 41.7% 25.8%
Year Ago Price 1.64 2.07 2,894 19,739 1.98 1,747 6,515 13.0 75.60 642.6 195.0 1,793 75.00 4.61 13.0 17,425 1,896 0.18 443.9 95.3 1,533 9.4 15.3 166.0 91.8 1,974 0.91 1.13 17.97 18.68 43.4 9.49 0.6 1,245.2 343.0 11,150 0.79 0.83 2.6 49.3 3.54 4.86 4.65
1 July 2011
19
Commodity price forecasts

Barclays Capital quarterly average commodity price forecasts
Q1 10 Base Metals (LME cash) Aluminium US$/t Copper US$/t Lead US$/t Nickel US$/t Tin US$/t Zinc US$/t Base Metal Index^ Precious metals Gold US$/oz Silver US$/oz Platinum US$/oz Palladium US$/oz Energy WTI US$/bbl Brent US$/bbl US Natural Gas US$/mmbtu UK Natural Gas p/therm Agriculture Cocoa US$/t Coffee Usc/lb Sugar Usc/lb Cotton Usc/lb Wheat Usc/bushel Corn Usc/bushel Soybeans Usc/bushel 2,165 7,243 2,219 20,078 17,225 2,288 199 1110 16.9 1562 440 78.9 77.4 5.0 35.6 3070 134 24.4 76 496 370 955 Q2 10 2,092 7,013 1,944 22,382 17,844 2,018 199 1196 18.3 1630 492 78.1 79.4 4.4 37.9 2987 140 16.0 81 467 355 957 Q3 10 2,088 7,243 2,031 21,178 20,559 2,013 203 1227 18.9 1550 493 76.2 77.0 4.2 43.0 2863 174 20.0 88 653 422 1035 Q4 10 2,343 8,634 2,390 23,598 26,001 2,315 238 1370 26.5 1697 678 85 87 4.0 52.5 2856 205 29.0 130 707 562 1245 Q1 11 2,503 9,646 2,605 26,899 29,950 2,393 266 1387 31.9 1789 788 95 106 4.2 57 3303 256 30.5 180 786 670 1379 Q2 11F 2,626 9,500 2,628 28,496 31,989 2,350 272 1490 36.7 1790 810 113 120 4.4 53 2920 265 25.5 200 785 760 1400 Q3 11F 2,650 10,500 2,750 25,000 33,000 2,400 280 1560 40.2 1840 825 106 110 4.3 50 2800 225 23.5 160 770 730 1430 Q4 11F 2,700 12,000 3,000 27,000 34,300 2,500 306 1520 28.3 1880 870 112 112 4.5 70 2900 195 21.5 138 715 660 1455
Barclays Capital annual average commodity price forecasts

2006 2007 2008 2009 2010 2011F 2012F Long Term Base Metals Aluminium US$/t 2,568 2,640 2,573 1,664 2,172 2,620 2,750 3,200 Copper US$/t 6,731 7,129 6,961 5,148 7,533 10,412 12,000 6,000 Lead US$/t 1,286 2,592 2,093 1,721 2,146 2,746 2,800 1,700 Nickel US$/t 24,271 37,276 21,115 14,604 21,809 26,849 30,000 17,500 Tin US$/t 8,761 14,542 18,500 13,579 20,407 32,310 37,000 18,000 Zinc US$/t 3,274 3,251 1,876 1,654 2,158 2,411 2,800 2,000 Base Metal Index^ 197.6 237.2 204.3 146.2 210 281 317 Precious Metals Gold US$/oz 604 697 872 972 1,226 1,489 1,300 850 Silver US$/oz 11.6 13.4 15.0 14.6 20.2 34.3 19.8 11.4 Platinum US$/oz 1,139 1,304 1,569 1,205 1,610 1,825 1,835 1,500 Palladium US$/oz 319 354 348 262 526 823 850 400 Energy WTI US$/bbl 66.2 72.3 99.7 62 80 106 106 137.0 Brent US$/bbl 66.1 72.7 98.4 63 80 112 105 135.0 US Natural Gas US$/mmbtu 6.98 7.12 8.90 4.16 4.39 4.35 4.55 5.25 UK Natural Gas p/therm 41.7 30.0 58.2 31.1 42.2 57.5 67.5 Coal API2 US$/t 63 87 144 71 93 123 Coal API4 US$/t 50 62 120 66 92 122 Coal Newcastle US$/t 49 66 128 72 99 131 Carbon (EUA) /t 18 20 23 13 15 19 28 40 Carbon (CER) /t na 16 17 12 12 14 20 25 Agriculture Cocoa US$/t 1503 1882 2555 2794 2944 2981 3050 na Coffee Usc/lb 108 117 132 125 163 235 190 na Sugar Usc/lb 14.7 9.9 12.1 17.7 22.3 25.3 23.0 na Cotton Usc/lb 52 57 64 57 94 170 105 na Wheat Usc/bushel 402 636 798 530 581 764 650 na Corn Usc/bushel 260 373 527 374 427 705 570 na Soybeans Usc/bushel 592 861 1234 1031 1048 1416 1290 na Note: ^Economist Intelligence Unit weight. Base metals prices are LME cash. Precious metals spot prices. WTI: front month NYMEX close. Brent: front-month IPE close. US natural gas: NYMEX front-month close. UK natural gas: NBP day ahead close. Cocoa, Coffee, Sugar, Cotton: front month ICE close. Wheat, Corn, Soybeans: front month CBOT close. Source: Barclays Capital
1 July 2011
20
Trade recommendations
Figure 10: Key recommendations
Contract Entry Date Entry price Current price (June-28-2011) Unit $ Gain/Loss % Open trades Rationale: Whilst we are wary of tighter US liquidity eventually bringing and end to the gold price rally we continue to see further price upside in the short-term. Long Comex gold Dec-11 26/11/2010 1376 1502 $/oz 264 20.4% Rationale: Recent warmer weather has reduced end-of-season storage estimates. We are closing this position as per closing prices on the day of publication. Natural gas spread widening 15/12/2010 0.63 0.41 $/mmbtu -0.22 n.a. Short forward Henry Hub Oct-11 4.49 4.41 $/mmbtu 0.07 n.a. Long forward Henry Hub Jan-12 5.12 4.82 $/mmbtu -0.30 n.a. Rationale: Better weather in the US and Europe, plus Russia's return to the export market are putting downward pressure on prices. We are closing this position as per closing prices on the day of publication. Long KBOT wheat Dec-11 20/04/2011 964 789 c/Bsh -175.0 -20.6% Rationale: The market is in the process of pricing in a much tighter medium-term outlook for crude and with our 2015 forecast for Brent pegged at $135/bbl we expect this trend to continue. Long Brent crude oil Dec-15 27/01/2011 98.2 102.0 $/bbl 3.9 3.9% Rarionale: Prices have weakened against our expectations due to the absence of the usual seasonal upswing in producer hedging volumes. We are closing this position as per closing prices on the day of publication. /t -1.9 Long Carbon EUA Dec-11 24/02/2011 15.4 13.5 -12.4% Rationale: The reassessment of long-term energy market dynamics as a result of Japan's nuclear crisis supports a period of concerted strength at the back end of the aluminium curve. Moreover, China's rising capital and enegy costs suggest a production slowdown ahead. Long LME aluminium Dec-15 29/03/2011 2884 2735 $/t -148.8 -5.2% Rationale: We expect further corn price gains supported by weather concerns which have seen lagging US corn plantings compared to five year averages and concerns on acreage and yields; elevated US ethanol production, strong US export sales and extremely low US inventory levels. Long CBOT corn Dec-11 20/04/2011 656 653 c/Bsh -2.5 -0.4% Rationale: Stocks are declining and physical indicators point to a pick up in buying, especially in China. The picture for raw materials is further tightening, with a narrowing in scrap discounts and worse than expected mine output in Q1. Long LME copper Dec-11 26/05/2011 9035 9076 $/t 41.0 0.5%
Note: The long position on COMEX gold was originally opened on 11/05/2010 and includes losses/gains from the previous trade (Dec-2010) The long position in KBOT wheat was originally opened on 27/01/2011 and includes losses/gains from the previous trade (May-2011) Source: Reuters, Barclays Capital
Figure 11: Closed trades

Closed Trades Contract Entry Date Exit Date Directional trades Long UK natural gas Q3-11 29/03/2011 26/05/2011 Long LME nickel Jun-11 24/02/2011 26/05/2011 Long European delivered coal (API2) ** Apr-11 27/01/2011 29/03/2011 Short Comex silver Dec-11 27/01/2011 24/02/2011 Jun-11 22/09/2010 24/02/2011 Long LME copper Long CBOT corn ** Mar-11 26/11/2010 24/02/2011 Short UK natural gas Summer 2011 19/10/2010 27/01/2011 Long NYMEX crude oil ** Dec-11 19/10/2010 27/01/2011 Short US natural gas Dec-11 13/08/2010 26/11/2010 Long ICE cotton Dec-10 14/04/2010 19/10/2010 Long LME lead Dec-10 21/06/2010 13/08/2010 Long LME copper ** Sep-10 10/12/2009 13/08/2010 Jun-10 22/02/2010 11/05/2010 Long NYMEX palladium Long ICE sugar Jul-10 18/03/2010 14/04/2010 Long LME Nickel Jun-10 10/12/2009 18/03/2010 Long NYMEX crude oil May-10 10/12/2009 18/02/2010 Mar-10 10/12/2009 18/02/2010 Long ICE sugar Spread trades Crude oil spread tightening ** 20/04/2011 26/05/2011 Long forward Brent crude Jul-11 Short forward Brent crude Aug-11 Gasoil spread tightening 22/09/2010 19/10/2010 Long nearby ICE gasoil Dec-10 Short further forward ICE gasoil Jun-11 21/06/2010 13/08/2010 US Henry Hub natgas Short position Oct-10 Jan-11 Long position 10/12/2009 18/02/2010 US Henry Hub natgas curve flattener Mar-10 Long position Short position Jan-11 Note: Entry and exit prices reference closing prices on the day of publication. ** These trades include gains/losses from previous trades. Source: Reuters, Barclays Capital Entry price 63.9 27501 114.5 27.1 7833.0 553.0 47.2 84.8 5.54 75.7 1851 7062 444 22.6 16331 75.4 23.3 -0.36 123.5 123.1 -16.8 669.75 686.50 0.66 5.01 5.67 1.47 5.38 6.9 Exit price 58.5 22821 125.7 33.1 9505 685.8 52.5 99.3 5.12 110.3 2065 7143 532 17.7 22760 79.1 26.5 -0.37 115.1 114.7 -15.3 705.50 720.75 0.65 4.35 5.00 1.20 5.17 6.375 Unit p/therm $/t $/t $/oz $/t c/Bsh p/therm c/bbl $/mmbtu c/lb $/t $/t $/oz c/lb $/t $/b c/lb $/b $/b $/b $/t $/t $/t $/mmbtu $/mmbtu $/mmbtu $/mmbtu $/mmbtu $/mmbtu Gain/Loss $ % -5.4 -4680 16 -6 1672 245 -5 12.1 0.43 35 214 345 88 -5 6429 3.7 0.03 0.34 -8.45 8.46 1.50 35.75 -34.25 0.01 -0.66 0.67 0.27 -0.21 -0.48 -8.5% -17.0% 14.4% -22.4% 21.3% 55.1% -11.3% 14.2% 7.7% 45.7% 11.6% 5.0% 19.8% -21.6% 39.4% 4.9% 13.8% -
1 July 2011
21
Global economic forecasts

Real GDP % over previous period, saar Global Developed Emerging BRIC America United States Canada Latin America Argentina Brazil Chile Colombia Mexico Peru Venezuela Asia/Pacific Japan Australia Emerging Asia China Hong Kong India Indonesia South Korea Malaysia Philippines Singapore Taiwan Thailand Europe and Africa Euro area Belgium France Germany Greece Ireland Italy Netherlands Portugal Spain United Kingdom Switzerland EM Europe & Africa Czech Repub. Hungary Poland Russia Turkey Israel South Africa 1Q11 4.2 1.6 7.3 7.6 2.9 1.9 3.9 5.4 9.1 5.4 5.4 9.8 2.1 6.6 6.9 6.3 -3.5 -4.7 9.3 9.4 11.9 8.4 4.0 5.4 7.0 15.0 22.5 19.0 8.4 3.0 3.4 4.3 3.8 6.1 0.6 5.1 0.5 3.6 -2.4 1.2 1.9 1.0 2.8 3.6 6.2 4.1 0.9 3.7 4.7 4.8 2Q11 3.3 1.3 5.7 6.8 2.8 2.0 2.5 4.8 5.8 2.9 5.0 5.5 6.5 5.7 4.4 4.7 -2.3 4.7 6.5 7.8 -1.2 7.6 6.0 4.5 4.9 4.8 0.3 0.4 0.8 2.1 1.2 2.1 0.8 1.6 -0.4 -1.4 1.3 2.6 -2.6 0.3 2.2 1.6 3.9 2.6 1.7 3.6 5.0 2.3 4.0 3.5 3Q11 4.0 2.7 5.7 7.1 3.1 3.0 2.5 3.3 2.0 3.4 5.0 3.0 3.0 4.6 5.0 6.5 3.7 5.1 7.2 8.0 4.1 9.1 5.8 6.2 2.5 4.0 3.0 1.9 2.0 2.1 1.7 1.8 1.8 2.1 -2.7 2.4 2.0 2.0 -2.3 1.0 2.1 1.6 3.0 2.4 1.4 3.7 3.3 1.7 4.0 3.7 4Q11 4.3 3.0 5.9 6.8 3.6 3.5 2.5 4.3 5.5 4.5 5.0 4.5 3.0 5.4 4.6 6.8 5.0 2.3 7.5 9.5 4.7 5.0 9.6 6.3 4.1 -0.1 4.9 4.5 5.1 1.9 1.9 2.3 1.9 2.2 -0.5 1.1 2.3 1.9 -1.7 1.2 2.3 1.2 1.9 2.4 1.2 3.7 0.9 1.2 4.0 3.9 1Q12 4.3 2.8 6.2 7.5 3.7 3.5 2.5 4.4 4.3 4.5 4.5 5.0 4.0 4.0 5.6 6.7 4.4 1.1 7.6 8.7 5.1 8.8 4.4 3.6 5.8 10.3 4.3 4.8 5.0 2.2 1.6 1.8 2.0 1.6 0.4 1.8 0.7 1.8 -1.1 1.9 2.4 1.6 3.4 3.8 2.9 3.7 3.3 2.9 4.8 4.1 Real GDP % annual chg 2010 4.9 2.5 7.9 8.9 3.7 2.9 3.2 6.2 9.2 7.5 5.2 4.3 5.4 8.8 -1.4 8.1 4.0 2.7 9.3 10.4 7.0 9.0 6.1 6.2 7.3 7.6 14.5 10.9 7.8 2.4 1.7 2.1 1.4 3.5 -4.4 -0.4 1.2 1.6 1.3 -0.1 1.3 2.6 4.6 2.2 1.1 3.8 4.0 9.0 4.9 2.8 2011 4.0 1.9 6.6 7.6 3.0 2.5 2.9 4.6 7.0 3.8 6.4 5.7 3.9 6.4 4.3 6.0 -0.5 1.4 7.8 9.3 5.5 7.7 6.5 4.4 5.0 5.0 6.0 5.9 3.6 2.6 2.0 2.7 2.0 3.4 -3.5 0.4 1.1 2.4 -1.7 0.8 1.6 2.0 4.4 2.8 2.6 3.9 4.3 5.8 5.0 3.9 2012 4.3 2.8 6.2 7.4 3.6 3.4 2.5 4.1 4.3 4.2 4.5 4.6 3.7 5.2 3.5 6.5 3.2 3.0 7.4 8.7 4.5 7.9 6.4 4.1 5.5 5.3 4.5 4.0 4.7 2.5 1.8 2.0 2.1 2.0 0.1 1.8 1.3 2.0 -1.3 1.7 2.2 1.4 4.2 3.3 3.2 3.7 4.6 4.1 4.2 4.1 1Q11 3.4 2.1 6.3 6.6 3.4 2.1 2.6 8.3 25.3 6.1 2.9 3.2 3.5 2.3 28.2 3.4 -0.2 3.3 5.4 5.1 4.0 9.5 6.8 4.5 2.8 4.0 5.2 1.3 3.0 3.3 2.5 3.5 2.0 2.2 4.5 0.8 2.3 2.0 3.7 3.2 4.1 0.2 6.3 2.0 4.1 3.8 9.6 4.3 3.9 3.8 Consumer prices % over a year ago 2Q11 4.0 2.8 6.4 6.9 4.3 3.4 3.3 7.9 23.3 6.6 3.2 3.0 3.3 2.9 22.8 3.8 0.5 3.8 5.7 5.6 5.2 9.3 5.9 3.9 3.5 4.6 4.5 1.6 3.6 3.7 2.8 3.3 2.2 2.5 3.2 1.4 2.9 2.4 3.7 3.3 4.5 0.2 6.9 1.9 4.3 4.6 9.7 6.5 3.8 4.5 3Q11 4.0 3.0 6.4 6.7 4.5 3.6 3.2 8.2 22.6 7.1 3.5 3.2 3.7 3.0 23.0 3.6 0.5 4.1 5.3 5.2 6.1 9.2 5.0 3.3 3.7 5.1 3.4 1.7 4.1 3.8 2.8 3.7 2.5 2.6 2.8 1.5 2.7 2.8 3.3 3.3 4.8 0.7 7.3 2.2 4.0 4.8 9.1 9.0 3.8 5.7 4Q11 3.7 2.8 5.7 5.4 4.4 3.5 3.1 8.2 22.9 6.6 4.0 3.2 3.6 3.6 24.3 2.8 0.0 3.8 4.2 3.4 5.4 8.3 6.0 2.8 3.9 5.0 2.8 1.8 4.5 3.8 2.9 3.4 2.7 2.7 3.5 1.8 2.9 2.9 3.6 3.1 4.9 0.8 6.8 2.3 3.9 4.6 8.2 8.5 3.7 6.0 Consumer prices % annual chg 2010 2.6 1.4 5.3 5.0 2.8 1.6 1.8 7.5 21.5 5.0 1.4 2.3 4.2 1.5 28.2 2.3 -1.0 2.8 4.1 3.3 2.4 9.6 5.1 3.0 1.7 3.8 2.8 1.0 3.3 2.6 1.6 2.3 1.7 1.2 4.7 -1.6 1.6 0.9 1.4 2.0 3.3 0.7 5.8 1.4 4.9 2.7 6.9 8.6 2.6 4.3 2011 3.8 2.7 6.2 6.4 4.2 3.2 3.1 8.1 23.5 6.6 3.4 3.2 3.5 2.9 24.5 3.4 0.2 3.8 5.1 4.8 5.2 9.1 5.9 3.6 3.5 4.7 4.0 1.6 3.8 3.6 2.7 3.5 2.3 2.5 3.5 1.4 2.7 2.5 3.6 3.2 4.6 0.5 6.8 2.1 4.1 4.6 9.1 7.1 3.9 5.0 2012 3.0 1.9 5.3 5.1 3.5 2.5 2.2 7.9 26.1 5.7 3.0 3.3 4.0 3.1 21.9 2.7 0.1 2.7 4.1 4.0 4.7 6.7 6.0 2.1 2.2 3.8 1.8 1.9 2.7 2.6 1.8 2.6 1.7 1.7 2.5 1.4 1.7 2.6 2.4 2.0 2.8 1.1 5.9 2.3 3.6 3.5 7.1 7.1 3.2 6.0
Note: Weights used for real GDP are based on IMF PPP-based GDP (2008-2010 average). Weights used for consumer prices are based on IMF nominal GDP (20082010 average). Source: Barclays Capital
1 July 2011
22
FX forecasts
FX forecasts Spot G7 countries EUR JPY GBP CHF CAD AUD NZD Emerging Asia CNY HKD INR IDR KRW LKR MYR PHP SGD THB TWD VND Latin America ARS BRL CLP MXN COP PEN EEMEA EUR/CZK EUR/HUF EUR/PLN EUR/RON USD/RUB BSK/RUB USD/TRY USD/ZAR USD/ILS USD/EGP USD/UAH 24.32 266 3.98 4.23 27.85 33.53 1.62 6.76 3.40 5.96 7.98 23.95 265 3.90 4.25 28.0 34.0 1.60 6.74 3.36 5.96 7.97 23.50 265 3.85 4.20 27.9 34.2 1.60 7.03 3.36 5.98 7.98 23.75 265 3.85 4.15 28.5 34.7 1.60 7.13 3.35 6.00 7.97 23.60 265 3.80 4.10 28.5 34.1 1.60 7.23 3.35 6.15 8.09 -1.4% -0.5% -2.2% 0.3% 0.2% 1.2% -2.0% -0.7% -1.2% -0.6% -0.6% -3.1% -1.0% -3.8% -1.2% -0.8% 0.8% -3.1% 2.7% -1.5% -1.4% -2.1% -1.9% -1.7% -4.4% -3.1% 0.3% 1.4% -4.8% 2.7% -2.3% -2.9% -4.2% -2.2% -2.7% -6.5% -5.8% -1.7% -1.5% -8.2% 1.2% -3.1% -5.5% -6.7% 4.11 1.56 468 11.72 1,771 2.76 4.1 1.54 460 11.65 1,763 2.75 4.15 1.5 450 11.5 1,750 2.75 4.15 1.55 450 11.6 1,750 2.76 4.65 1.55 450 11.8 1,750 2.78 -0.7% -3.9% -3.5% -2.1% -1.6% -0.5% -1.1% -7.7% -6.3% -4.0% -2.5% -0.8% -3.9% -6.5% -7.2% -4.0% -2.8% -0.8% 0.6% -10.3% -9.1% -4.2% -3.7% -0.9% 6.46 7.78 44.70 8579 1068 109.5 3.02 43.39 1.23 30.71 28.72 20585 6.42 7.77 44.75 8500 1075 109.5 3.00 43.50 1.220 30.35 28.85 20600 6.36 7.77 45.25 8600 1050 109.0 2.94 42.80 1.210 30.00 28.20 20500 6.28 7.77 44.50 8700 1025 108.5 2.90 42.00 1.190 30.00 27.75 20500 6.11 7.77 44.00 8500 1025 107.8 2.84 41.50 1.190 29.50 27.00 20000 -0.7% -0.1% -0.2% -1.1% 0.4% -0.2% -0.8% 0.2% -0.7% -1.6% 0.7% -0.2% -1.4% -0.1% 0.0% -0.6% -2.3% -1.0% -3.1% -1.7% -1.5% -3.1% -1.1% -3.1% -2.3% 0.0% -3.0% -0.5% -5.1% -2.1% -4.7% -3.7% -3.1% -3.7% -2.1% -6.2% -4.3% 0.1% -6.4% -5.1% -5.7% -2.8% -7.3% -5.2% -3.0% -6.0% -3.4% -13.2% 1.45 80.7 1.61 0.84 0.96 1.07 0.83 1.48 80 1.66 0.91 0.93 1.07 0.78 1.50 82 1.72 0.90 0.93 1.04 0.76 1.48 83 1.74 0.95 0.93 1.00 0.74 1.44 85 1.76 0.98 0.97 0.95 0.72 2.1% -0.8% 3.4% 8.2% -3.6% 0.1% -5.6% 3.6% 1.7% 7.2% 7.1% -3.7% -1.9% -7.7% 2.5% 3.1% 8.6% 13.1% -3.9% -4.6% -9.5% 0.4% 5.9% 10.1% 16.9% -0.3% -7.3% -10.8% 1m 3m 6m 1y 1m Forecast vs outright forward 3m 6m 1y
1 July 2011
23
This weeks key data releases

US durable goods orders rose 1.9% in May, above the consensus expectation, with April also being revised higher, with a strong rebound in core durable goods giving encouraging signs. Q1 GDP was revised up to 1.9% from 1.8% in the third estimate, as expected; our economists continue to expect a similar pace in Q2. US consumer confidence in June edged slightly lower (to 58.5 from 60.8 in May) while home prices trended lower, but with less intensity (falling 0.09% m/m in April). US pending home sales rose 8.2% in May, likely reflecting a reversal of adverse weather conditions. The Chicago PMI surprised to the upside in June, increasing to 61.1 from 56.6. The German IFO business climate index rose unexpectedly to 114.5 from 114.2 in May, with an improvement in the current assessments. With the approval of the Greek Medium-Term Fiscal Strategy (MTFS) secured, the focus is turning back towards the next steps in the process, and in particular the private sector involvement. This will be discussed on Sunday at the Eurogroup meeting: some details and commitments are likely to be made public, and the EU will likely commit to a second bailout package for Greece (probably with details on total size and length), which should be credible enough to allow the disbursement of the next tranche of the first package. However, our strategist suspect it will be too early at that time to have final terms on the form and the size of the PSI, and therefore the exact split of contributions between the private sector, the EU and the IMF is likely to be left somewhat open. Japanese IP increased 5.7% m/m in May, in line with expectations. The Chinese NBS manufacturing PMI posted a greaterthan-expected decline in June, falling to 28-month-low at 50.9. Overall, the June leading indicators show continued moderation in economic activity, but the near-term inflation risks remain significant, in our econimists view. They maintain a call for one more rate hike in 2011, likely in early to mid-July, around the release of June CPI and Q2 GDP data (15 July).
Monday 27 Jun Detailed (May) China commodity data out this week (National Bureau of Statistics) EIA Monthly Energy Review (published this week) Tuesday 28 Jun US Consumer Confidence EIA Monthly Energy Review Wednesday 29 Jun Thursday 30 Jun Friday 01 Jul CFTC Data SHFE Aluminium, Copper and Zinc Inventory Data US Motor Vehicle Sales Euro area Manuf. PMI Euro area Unemployment US Construction Spending US ISM Mfg Index 08 Jul CFTC Data SHFE Aluminium, Copper and Zinc Inventory Data US employment report
Dept of Energy Weekly Oil EIA Weekly Natural Gas Data Storage US Pending Home Sales USDA NASS Acreage Report USDA NASS Quarterly Stocks Report Euro area Flash HICP US Chicago PMI 06 Jul US ISM Services Index euro area GDP German manuf. orders 07 Jul EIA Weekly Natural Gas Storage Dept of Energy Weekly Oil Data German IP ECB Rate Announcement 14 Jul EIA Weekly Natural Gas Storage USDA Feed Outlook USDA Wheat Outlook OECD Leading Economic Indicator euro area HICP US retail sales 21 Jul
04 Jul US Public Holiday euro area PPI
05 Jul euro area retail sales
11 Jul Preliminary (June) China commodity data out this week (National Bureau of Statistics) OECD Main Economic Indicators
12 Jul USDA WASDE Report OPEC Monthly Oil Report EIA Short-Term Energy Outlook US Trade
13 Jul Dept of Energy Weekly Oil Data IEA Oil Market Report USDA Oil Crops Outlook USDA Cotton and Wool Outlook euro area IP 20 Jul
15 Jul CFTC Data SHFE Aluminium, Copper and Zinc Inventory Data euro area trade US CPI US IP US consumer sentiment 22 Jul CFTC Data SHFE Aluminium, Copper and Zinc Inventory Data
18 Jul US housing market index
19 Jul US Housing Starts German ZEW Survey US housing starts
Dept of Energy Weekly Oil EIA Weekly Natural Gas Data Storage US Existing Home Sales US FHFA housing price index US leading indicators US Philly Fed Index
1 July 2011
24
COMMODITIES RESEARCH ANALYSTS

Barclays Capital 5 The North Colonnade London E14 4BB Gayle Berry Commodities Research +44 (0)20 3134 1596 gayle.berry@barcap.com Helima Croft Commodities Research +1 212 526 0764 helima.croft@barcap.com Miswin Mahesh Commodities Research +44 (0)20 77734291 miswin.mahesh@barcap.com Amrita Sen Commodities Research +44 (0)20 3134 2266 amrita.sen@barcap.com Shiyang Wang Commodities Research +1 212 526 7464 shiyang.wang@barcap.com Commodities Sales Craig Shapiro Head of Commodities Sales +1 212 412 3845 craig.shapiro@barcap.com Martin Woodhams Commodity Structuring +44 (0)20 7773 8638 martin.woodhams@barcap.com Peter Rozenauers Commodities Sales, Non Japan Asia +65 9114 6994 peter.rozenauers@barcap.com Xin Yi Chen Commodities Research +65 6308 2813 xinyi.chen@barcap.com Paul Horsnell Commodities Research +44 (0)20 7773 1145 paul.horsnell@barcap.com Roxana Mohammadian-Molina Commodities Research +44 (0)20 7773 2117 roxana.mohammadian-molina@barcap.com Trevor Sikorski Commodities Research +44 (0)20 3134 0160 trevor.sikorski@barcap.com Yingxi Yu Commodities Research +65 6308 3294 yingxi.yu@barcap.com Suki Cooper Commodities Research +1 212 526 7896 suki.cooper@barcap.com Costanza Jacazio Commodities Research +1 212 526 2161 costanza.jacazio@barcap.com Kevin Norrish Commodities Research +44 (0)20 7773 0369 kevin.norrish@barcap.com Nicholas Snowdon Commodities Research +1 212 526 7279 nicholas.snowdon@barcap.com Michael Zenker Commodities Research +1 415 765 4743 michael.zenker@barcap.com James Crandell Commodities Research +1 212 412 2079 james.crandell@barcap.com Kerri Maddock Commodities Research +44 (0)20 3134 2300 kerri.maddock@barcap.com Biliana Pehlivanova Commodities Research +1 212 526 2492 biliana.pehlivanova@barcap.com Sudakshina Unnikrishnan Commodities Research +44 (0)20 7773 3797 sudakshina.unnikrishnan@barcap.com
1 July 2011
25
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COMMODITIES RESEARCH

Forecasts and data releases

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

COMMODITY SECTOR VIEWS

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

Figure 1: Time for dynamic commodity strategies

3.07 0.24 0.03 -0.01 -0.49 0.50

Barclays Capital | Commodities Weekly

Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital

Barclays Capital | Commodities Weekly

Figure 3: A very subdued prompt NBP over the past month

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

Nigeria: Abuja bombing may demonstrate depth of discontent in the north

Barclays Capital | Commodities Weekly

Mar-11 EUA Front year (/t)

Jun-11 EUA-CER spread

sCER Front Year (/t)

Source: Barclays Capital

Barclays Capital | Commodities Weekly

Bullish signs at the end of a long tunnel

Figure 5: New Barclays Capital U.S. gas price outlook, $/MMBtu

3.94 4.25 3.75 3.75 4.00 4.50

Barclays Capital | Commodities Weekly

IEA: A shot in the dark

Figure 6: US Department of Energy weekly data summary (mb)

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

Risk on, Risk off

Figure 7: Phase 2 (front year) (/t CO2) ups and downs

EUA front year sCER front year EUA-CER spread

Source: ECX, Barclays Capital

Barclays Capital | Commodities Weekly

Barclays Capital | Commodities Weekly

Source: Ecowin, Barclays Capital

Barclays Capital | Commodities Weekly

FORECASTS AND DATA RELEASES

Commodity price comparisons

Barclays Capital | Commodities Weekly

Commodity price forecasts

Barclays Capital annual average commodity price forecasts

Barclays Capital | Commodities Weekly

Figure 11: Closed trades

Barclays Capital | Commodities Weekly

Global economic forecasts

Barclays Capital | Commodities Weekly

Source: Barclays Capital

Barclays Capital | Commodities Weekly

This weeks key data releases

04 Jul US Public Holiday euro area PPI

05 Jul euro area retail sales

18 Jul US housing market index

19 Jul US Housing Starts German ZEW Survey US housing starts

Barclays Capital | Commodities Weekly

COMMODITIES RESEARCH ANALYSTS

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