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1 Commodities Daily 6 Aug 2009 Focus: Oil forward curve signals tighter balance Both ICE Brent crude and WTI forward curves have become flatter since 21 July. 2-year contango on the WTI and Brent curves have contracted 14.3% and 24% respectively. We believe this indicates a tightening in global crude oil supply/demand balances albeit with still a large supply overhang in the US. We estimate fair-value for front-month WTI crude oil at $70/bbl to $73/bbl in Q3:09/Q4:10. Base metals retreated overnight from yesterday s highs. So far, equities are pushing higher in Europe, and the futures market is pricing in gains for US equities later today. This could support base metals this afternoon. Aluminium is trading above $2,000 after yesterday s rally. Zinc and lead continue to track copper on an intra-day basis. Walter de Wet* CFA +44 (20) Walter.DeWet@standardbank.com Leon Westgate* +44 (20) Leon.Westgate@standardbank.com Manqoba Madinane* +27 (11) Manqoba.Madinane@standardbank.co.za Gold managed to consolidate above $960 yesterday. However, it remains at levels where we have seen strong resistance in the past year. After Tuesday s rally on the back of potential strikes in South Africa, platinum and palladium have stabilized. A surprise 1,670K increase in US DOE crude oil inventories saw frontmonth WTI crude oil prices slide from $71.70/bbl in London to $69.70/bbl in New York. Commodity price data (5 August 2009) Base metals LME 3-month Open Close High Low Daily change Change (%) Cash Settle Change in cash settle Cash 3m Aluminium 2,039 2,070 2,115 1, , Copper 6,120 6,200 6,235 6, , Lead 1,940 1,951 1,970 1, , Nickel 19,725 20,450 20,451 19,350 1, , , Tin 14,900 15,300 15,350 14, , Zinc 1,880 1,925 1,933 1, , Sources: Standard Bank; LME; Bloomberg Open Close High Low day/day Change (%) ICE Brent % NYMEX WTI % ICE Gasoil % API2 Q3' % ICE EUA Dec % AM Fix PM Fix High bid Low offer Closing bid Change (d/d) EFPs Gold /2.5 Silver /-1.0 Platinum 1, , , , , /4 Palladium /3 Please refer to the disclaimer at the end of this document.

2 Focus: Oil forward curve signals tighter balance 30-Day WTI crude historical volatility Both ICE Brent crude and WTI forward curves have become flatter since 21 July. 2-year contango on the WTI and Brent curves have contracted 14.3% and 24% respectively. We believe this indicates a tightening in global crude oil supply/ demand balances albeit with still a large supply overhang in the US. We estimate fair-value for front-month WTI crude oil at $70/bbl to $73/bbl in Q3:09/Q4:10. Crude oil prices around the $71/bbl level may reflect current macroeconomic factors: a weak US dollar, and improving industrial crude oil demand $/bbl In China, the second-largest crude oil consumer, manufacturing sector activity continues to expand, with the country s CLSA Manufacturing PMI rising 1.93% m/m in July, to 52.8 (above the threshold 50 level). The Japanese Leading index has climbed 3.7% m/m signalling improved economic conditions, which bodes well for crude oil demand. US API distillate fuel inventories contracted 1,043K barrels last week, the first decline in 11 weeks, which could signal improving US industrial crude oil demand. US API crude oil inventories have also realised a net 20,320K barrel cumulative contraction since 17 April also signalling better demand conditions. However, API gasoline and DOE crude oil inventories have seen a cumulative 2,044K and 6,822K barrel increase in the Base metals Source: Standard Bank, LME past two weeks adding to the large US supply overhang. This could limit upside potential for crude oil prices we therefore do not forecast prices above $75/bbl going into Q4:09. Manqoba Madinane Base metals retreated overnight from yesterday s highs. Part of the selling followed equity markets which ended lower in the US (the Dow ended the day down 0.42%). Except for tin, the other base metals all have a 10-day correlation of more than 0.9 with the Dow. But most financial markets are highly correlated at this stage. Base metals (with the exception of tin) also have a very high correlation with the dollar, crude oil and PGM. This morning, LME warehouse stock figures showed marginal declines in copper stocks (down 725mt), nickel stocks (down 126 mt), and zinc stocks (down 175mt). However, at this stage, the base metal market is looking towards other financial markets for direction. So far, equities are pushing higher in Europe, and the futures market is pricing in gains for US equities later today. This could support base metals this afternoon. There are a few interesting data releases today. First is the interest rate decision by the ECB. We expect interest rates will be left unchanged in the Eurozone something which could support the euro. Second, in the US, we will be looking at the initial jobless claims and continuing claims data. Should both data releases come in better-than-expected, US equity markets could find support. The rise in risk appetite may also see the dollar weaker. If recent correlations are in indication, both these events should support the base metal complex. With the recent rise in the copper price the metal is finding good support above $6,000. However, fears about possible selling of SRB stockpiles out of China remain, which seems to keep the copper market nervous at the current price level. The metal traded as high as $6,235 yesterday, but gave up some gains overnight, to trade around $6,100 this morning. Aluminium is trading above $2,000 after yesterday s rally. While we believe power disruptions in South Africa due to strikes are unlikely, the uncertainty around this may provide support. Given that a large part of LME inventory is unavailable due to financing deals, possible supply impacts are likely to have a greater impact than would the data suggest. Aluminium closed at $2,070 yesterday. Zinc and lead continue to track copper on an intra-day basis. Lead closed at $1,951 and zinc at $1,925 yesterday. We maintain that zinc has some catching-up to do relative to the rest of the base metals complex Jun 07-Jul 14-Jul WTI 2 year contango 21-Jul 28-Jul 04-Aug Brent 2 year contango Walter de Wet 2

3 Gold managed to consolidate above $960 yesterday. However, it remains at levels where we have seen strong resistance in the past year. Yesterday, we have seen fairly large volumes of scrap gold coming to the market. The scrap flow should provide some resistance. But, given the current high correlation between gold and the euro/dollar exchange rate (10-day correlation currently at 0.87), we will look to the dollar to determine gold s intra-day moves. Support is at $960 and $954. Resistance is at $969 $970. A break above this level could see gold test $977. After Tuesday s rally on the back of potential strikes in South Africa, platinum and palladium have stabilized. We still believe major power disruptions due to strikes remain unlikely. However, given that the PGM market is not as liquid as the gold and silver markets, both metals should continue to find good support. The possibility of an Eskom strike comes amid ongoing wage negotiations between platinum miners and labour unions. We also see strikes by workers at platinum mines as unlikely at this stage. However, the uncertainty should continue to support PGM prices. More dollar weakness could push platinum towards $1,330. While we see more upside for platinum in the short term, should it transpire that strikes will not affect PGM supply, we believe that platinum could then be due for a correction lower. Platinum support is at $1,265 and resistance at $1,300. This morning, the ECB will decide on interest rates. We expect rates to remain unchanged. Of more interest is initial jobless claims data in the US (due later today). A good figure could see equity markets up and the dollar down. Walter de Wet A surprise 1,670K increase in US DOE crude oil inventories saw front-month WTI crude oil prices slide from $71.70/ bbl in London to $69.70/bbl in New York. However, prices jumped back to $72.13 in aftermarket trade amid market speculation that the US congress would inject a further $2 billion into the car-purchase subsidy programme. DOE data showed a 218K barrel contraction in US gasoline stocks, putting the cumulative contraction over the past two weeks at 2,533K barrel. However, this conflicts with Tuesday s 2,091K API gasoline inventory gain which could see some inventors remain on the sidelines, waiting for more signals on US crude oil demand developments. The front-month WTI crude oil contract slipped to $71.19/bbl in early Asian trade this morning before a 1.32% and 3.7% m/m gain in the Nikkei and Japanese Leading index respectively saw it return to $72.07 in early European trade. Look out for US initial jobless claims data later today. ICE Brent crude oil rallied from $74.80/bbl to $75.98/bbl in London this morning ahead of German factory orders data amid market expectations for a 0.6% m/m increase. Crude oil prices rallied despite Kuwait s Oil minister s ruling out of a further OPEC output reduction at the oil Cartel s next meeting in Vienna next month. Total distillate fuels inventories in Singapore, Asia s biggest oil-trading centre, climbed 8.2% w/w to 43,270K barrels. N.W.E FOB jets fuel climbed from $646/mt, in Asia, to $654/mt in London trade this morning after British Airways announced a 1% y/y increase in revenue passenger kilometers in H1:09. Thermal coal prices gained yesterday, supported by rising crude oil prices. API2(CIF ARA) for Q4:09 delivery climbed $0.25/mt to $14.60/mt; API4(FOB) for Q4:09 delivery gained $0.20/mt to $12.80/mt. Russia s electricity production grew 3.7% m/m in July. Taiwanese coal imports also increased 0.5% m/m to 5.26 million metric tonnes, the first rise in 8 months. Manqoba Madinane 3

4 Base metals Daily LME stock movement (mt) Metal Today Yesterday In Out One day change YTD change (mt) Contract turnover Aluminium 4,569,600 4,567,850 7,075 5,325 1,750 2,240, , ,930 Copper 284, , ,400 8, ,035 Lead 114, ,800 1,325-1,325 68, ,947 Nickel 105, , ,294 1, ,491 Tin 18,675 18, , ,400 Zinc 433, , ,375 6, ,748 Shanghai 3-month forward prices Copper 48,030 47, Cu Aug' % Zinc 15,105 15, ZAR metal prices (5 Aug 2009) Aluminium Copper Lead Nickel Tin Zinc ZAR/USD fix Cash 15,932 48,470 15, , ,374 14, month 16,657 49,891 15, , ,118 15, futures pricing Price Change Price Change Price Change Price Change Price Change 1-month forward 2-month forward 3-month forward 6-month forward 1-year forward Sing Gasoil ($/bbbl) Gasoil 0.1% Rdam ($/mt) NWE CIF jet ($/mt) Singapore Kero ($/bbl) % Rdam barges ($/mt) % Fuel Oil FOB ($/mt) Sing FO 380 Cargo ($/mt) Sing FO180 Cargo ($/mt) Thermal coal Q3-09 Q4-09 Q1-10 Cal 11 Cal 12 API2 (CIF ARA) API4 (FOB RBCT) Carbon Spot Dec-09 Dec-10 Dec-11 Dec-12 ICE - ECX EUA ( /mt) ICE - ECX CER ( /mt) Forwards (%) 1-month 2-month 3-month 6-month 12-month Gold Silver USD Libor Technical Indicators 30-day RSI 10-day MA 20-day MA 100-day MA 200-day MA Support Resistance Gold Silver Platinum , , , , , , Palladium Active Month Future COMEX GLD COMEX SLV NYMEX PAL NYMEX PLAT DGCX GLD TOCOM GLD CBOT GLD Dec'09 Sep'09 Oct'09 Oct'09 Aug'09 Jun'10 Aug'09 Settlement , , Open Interest 392,834 99,477 19,778 23, ,245 3,023 Change in Open Interest 9, , Date: 5 August 2009 Sources: Standard Bank; LME; Bloomberg Cancelled warrants (mt) COMEX active month future prices Cancelled warrants (%) Metal Open Last 1d Change Open Close Change Change (%) Aluminium 15,300 15, Ali Aug' % 4

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