Commodity Prices Bottoming Out, Recovery Due, Barclays Says

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"Investors have been nervous about the commodity markets, but the reality now is it's potentially a very good time to consider investment in these commodities."

Commodity prices, including oil, have started to bottom out and are likely to rise in the second quarter, supported by signs China's economic stimulus plan has taken effect, investment bank Barclays Capital forecast today.

The bank predicts the price of a barrel of oil will rise to $50 in the second quarter and to $76 by the fourth, Justin Hyde, director overseeing commodities sales in Asia, said in Hong Kong. He recommends investing in commodity markets at current prices.

"We have seen most of the aggressive contraction in these markets," said Hyde. "We are starting to form a bottom and are in the late stages of a recession."

"The China stimulus package and the support for the domestic economy generally is going to be an important driving factor to ensure that stabilization in commodity prices stays in place and we start the turnaround in demand," said Hyde.

The Reuters/Jefferies CRB Index of 19 commodities has fallen to the lowest level since June 2002 this year. Benchmark crude oil in New York was trading at $45.20 a barrel at 3 p.m. in Hong Kong.

"Investors have been nervous about the commodity markets, but the reality now is it's a potentially a very good time to consider investment in these commodities," said Hyde.

The prospects for the energy sector in emerging economies like China are also likely to be strong in the coming years because of the huge potential future demand for oil and gas, he said.

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