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Last Updated : 03 April 2012 at 21:35 IST

Commodities: What to expect in Q2, 2012

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Long only commodity indices have performed strongly so far this year. However, there has been a significant divergence across the DBLCI index family. In terms of market neutral strategies, the most favourable looks to be the DB Commodity Curve Alpha index heading into Q2, 2011

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  • NEW YORK (Commodity online): Long only commodity indices have performed strongly so far this year. However, there has been a significant divergence across the DBLCI index family. In terms of market neutral strategies, the most favourable looks to be the DB Commodity Curve Alpha index heading into Q2, 2011

    Crude Oil: Oil prices are moving towards levels that lead to demand destruction. While lower natural gas and power prices are helpful, investors should adopt cautiously bearish view heading into the second quarter and recommend selling Brent backwardation.

    US Natural Gas: Strong production growth, high storage levels and a mild winter have been bearish factors. However, announced production cuts and recent upgrades to the US economic growth outlook imply that the balance may look modestly better in the latter-half of the year.

    EU Power, Gas & Emissions: Weak Eurozone growth is overshadowing the outlook for power, gas and CO2 prices. Over-capacity in the German power market and a weak demand in the EU gas market are also expected.

    Precious Metals: Given a lack of monetary-policy-related catalysts expected in the second quarter, gold prices could remain under some pressure, and potentially approach the bottom of the trading range established over the past couple of quarters.

    Industrial Metals/Materials: Base metals complex could experience weakness as global growth moderates in the second quarter. China consumption trends could be weaker than normal given the lack of government support in the near-term, putting pressure on buyer sentiment.

    Source: Deutsche Bank Commodities Quarterly Report

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