London, 10 April 2011: Commodities Now

Energy has been the strongest part of the commodities market over the past month, and Barclays Capital believe that the opportunity to benefit from exceptionally strong crude oil and gasoline fundamentals remains in place. This month BarCap rank the energy sector most highly, but are keeping others at neutral.

"We expect US gasoline to be the strongest energy market this month as the US gears up for the start of the driving season with domestic demand firm, inventories having fallen sharply, production below average for the time of year and emerging market demand booming," according to Kevin Norrish, commodities research with BarCap.

"The intensification of MENA issues, further indications of strong oil demand, a shrivelling of spare capacity and the lack of any red flag to higher oil prices from OPEC suggest even tighter oil market fundamentals lie ahead. We also expect a significant increase in carbon demand, especially from German utilities, to be positive for European prices."

In the agricultural complex, corn remains BarCap's top ranked commodity following further downgrades to inventory levels, strong ethanol markets, a robust pace of US export sales and Chinese imports and ongoing US weather risks. Copper and nickel remain their top ranked base metals, whilst in precious metals they prefer PGMs to gold and silver.

Since its previous reweighting on 4 March, the Barclays Capital Commodity Research Index has generated an excess return of 2.32%, marginally higher than the neutral portfolio, in which weights are held constant, which returned 2.26%. Since its launch in December 2010, the BCRI has gained 20.1%, compared with 19.9% for the neutral portfolio.

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Commodities Now