WEEKLY COMMODITY COMPENDIUM

COMMODITIES RESEARCH 7 May 2010 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 22 WEEKLY COMMODITY COMPENDIUM The week has seen all major risky assets post heavy losses. Commodity prices have come under pressure in a market dominated by concerns about the Greek debt crisis, sovereign risk and contagion; the flux in FX markets and a firmer dollar. This is occurring at a time when, paradoxically, commodity-specific fundamentals are firming and the recent spate of macro-data releases for commodity-related sectors has been supportive. Crude oil prices are down $10 on the week, while, if anything, the pick-up in OECD oil demand is gaining pace. Anecdotal evidence is pointing towards the recent price correction in base metals markets having sparked a rise in consumer buying interest, while physical premiums have been firming. Energy 5 We would view the fall in oil prices to the bottom of the $80-90 range as transitory, with the latest European economic developments having an indirect effect on oil demand at best; Iraq: summer of discontent looming as election impasse drags on; revision to EIA-914 production data showed that in 2009 US dry gas production was 500 MMcf/d lower on average than previously reported; after spending Q1 stuck at about the €13/t level, EUAs have broken out in spectacular fashion; the Macondo spill appears to us to be far more serious than Exxon Valdez in its potential longer-term implications for the oil industry; divergent demand dynamics in the Atlantic and Pacific basins accelerating the shift of coal trade flows from west to east Metals 13 Corporate mine production results from Q1 10 offered absolute nothing to suggest 2010 will alter the continued pattern of mediocre output improvements. Agriculture 15 Agricultural commodity price performance has not followed the logic offered by swap dealer positions. Forecasts and data releases 17 Sudakshina Unnikrishnan+44 (0) 20 7773 3797 sudakshina.unnikrishnan@barcap.com Natalya Naqvi +44 (0) 20 7773 0639 natalya.naqvi@barcap.com www.barcap.com Barclays Capital | Weekly Commodity Compendium 7 May 2010 2 Commodity review Commodity prices have come under pressure in a market dominated by concerns about: the Greek debt crisis, sovereign risk and contagion; the flux in FX markets; and a firmer dollar. The week has seen all major risky assets post heavy losses, with the Dow Jones Industrial average recording its worst one-day drop since February 2009, whereas the euro fell to its lowest levels in over a year against the dollar. This is occurring at a time when, paradoxically, commodity-specific fundamentals are firming and the recent spate of macro-data releases for commodity-related sectors has been supportive. Anecdotal evidence is pointing towards the recent price correction in base metals markets having sparked a rise in physical buying interest from consumers, while physical premiums in nickel and aluminium have been firming. In copper, the relatively steeper fall in LME prices has resulted in a re-opening of the Chinese import arbitrage window and import premiums are reported to have increased from $60 last week to about $70-90/t. Even the domestic Chinese physical market, which has been in a physical discount for the past few weeks, has returned to a premium, suggesting stronger incentives for imports and material flowing out of domestic warehouses. Indeed, SHFE copper stocks posted their first decline since early April and the biggest since late March. We note a pick-up in Chinese consumer interest, though consumers are adopting a cautious attitude given the current uncertainty. While the week has seen the cumulative crude oil price loss to almost $10/bbl over the past three trading sessions, as our extract on the oil market notes, very little has changed fundamentally; if anything, the pick-up in OECD oil demand is gain