COMMODITIES RESEARCH 6 August 2010 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 25 WEEKLY COMMODITY COMPENDIUM A largely positive week for commodity prices has seen price action being dominated by the wheat market, where prices are trading 25% higher on the week and 50% up on the month, reaching two-year highs. Fears have been piqued that we may be heading back to the 2007-08 food crisis, although in our view market fundamentals are less compelling this time around with many of the key factors that propelled prices in that period missing. Earlier this week, the Russian government announced a ban on grain exports from 15 August to 31 December, confirming market fears over potential export restrictions being put in place by Black Sea producer-exporters. Oil prices have breached $80/bbl in recent days, which we think could indicate that the oil market is finally starting to try to look past economic pessimism and instead focus on strong oil fundamentals. There appears to be very little priced into the market in terms of geopolitics as of now, and we would see these developments as providing an additional layer of support to a market which, in our view, is already starting to look set for a more prolonged period above $80/bbl. We also discuss the Nigerian national elections with the Nigerian parliament’s decision to move national elections to January from April 2011, setting the stage for months of political jockeying and infighting that could deepen regional and ethnic divisions in the country. Further, the 2011 election cycle could bring new violence in the oil region. Energy 7 The persistent strength in underlying oil demand data signals the need for market sentiment to adjust its focus on oil market fundamentals; despite recent downward revisions, US oil demand remains on track to record moderate growth in 2010; carbon markets: show us some legislation; oil markets breakout past the $80 barrier; Nigerian election season commences as polls moved to laniary; US natural gas outlook. Metals 17 Can platinum mine supply return to growth this year? Forecasts and data releases 19 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 Barclays Capital | Weekly Commodity Compendium 6 August 2010 2 Commodity review A largely positive week for commodity prices has seen price action being dominated by the wheat market where prices are trading 25% higher on the week and 50% up on the month, reaching two-year highs. Fears have been piqued that we may be heading back to the 2007-08 food crisis, although in our view market fundamentals are much less compelling this time around with many of the key factors that propelled prices in that period missing. Earlier this week, the Russian government announced a ban on grain exports from 15 August to 31 December, confirming market fears over potential export restriction being put in place by Black Sea producer-exporters. The potential for further short-term price gains remains although we do not expect the recent price momentum to continue unless supply prospects deteriorate significantly from current expectations. For prices to climb higher we will need to see other Black Sea producer-exporters putting export restrictions in place. Even then though, it must be highlighted that export sources can move to the US, EU, Australia to fill the vacuum created by the Russian ban. Global inventories also remain at comfortable levels and are well above 2007-08 levels when we saw wheat prices hitting all-time highs. Inflationary concerns in Russia however have been ignited with domestic prices sharply higher (for details please see a joint piece we published with our Emerging Market economists, Russia: The heat is on – Grains, rates, inflation and mercury rising). Oil prices have breached $80/bbl in recent days, as discussed in the latest Weekly Oil Data Review, which we think could indicate that the oil market is finally starting to try to look past economic pessimism and instead focus on strong oil fundamentals. We also (again) highlight t