LONDON (Commodity Online): Commodity market participants still appear very wary of engaging with risk. Although there have been promising signs already this year that US growth is picking up and that business confidence in China is improving, European sovereign debt issues continue to cloud the picture with Italian bond yields moving back above 7% and both the euro and European stock markets falling again this week, said Barclays Capital in a research note.
Although Barclays is positive on the prospects for commodity prices in Q1, for now they are still positioning relatively cautiously across sectors. This month bank is overweight in energy where geopolitical and weather risks are skewed to the upside but are moving back close to benchmark weights in other market sectors, implementing small underweight positions in agriculture, base and precious metals.”
By market Barclays biggest overweight is in WTI. This is predicated on the recent outperformance of Brent relative to WTI reversing somewhat over the coming month as crude oil inventories continue to fall at Cushing and spare storage capacity is now at an all-time high. Other major overweights are in US gasoline, corn and soybeans. Main underweights are US nat gas, nickel, coffee and cotton.
Over the past month the BCRI (up 1.7%) has marginally outperformed the base portfolio (1.6%), where weights are left unadjusted. For 2011 as a whole, the BCRI was down by 3.9%, 0.4% more than the base portfolio. However, it considerably outperformed some of the key commodity index benchmarks. For example, the DJUBS index, reweighted in line with BarCap Research rankings outperformed the standard unadjusted version by 2.7%.
