London, 23 June 2011

Recent price volatility in commodities does not mark a fundamental turning point, according to the latest edition of Commodity Cross Currents from Barclays Capital ... so long as China manages a soft landing, the demand outlook still appears robust.

May saw a new outbreak of uncertainty among investors and commodity market participants. However, "Inventory levels and spare capacity are wearing very thin indeed in some key markets such as oil, as well as in several agricultural commodities markets," according to BarCap.  "So there are still very significant supply risks posed by geopolitics and weather events."

Increasingly, degrees of supply constraint will be the main differentiators of price performance in commodities going forward. "We favour crude oil, copper, corn and gold in Q3," say BarCap.

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