Commodity CFTC: Speculators piled into energy just before rout

Speculators boosted their bullish bets in commodities, particularly in energy, by the most since October during the week ending May 1. The data from the CFTC showed that hedge funds and other large speculators boosted their net long exposure in the 24 commodities futures and options tracked in this report by 7.7 percent to 1,342,000 contracts representing a USD 8.7 billion rise in nominal value to USD 111.7 billion.

Most noticable were the strong buying of WTI with the net long position rising by 23k contracts just ahead of the biggest rout in crude since October last year. This helps to explain the agressiveness of the sell-off but once again goes to show the impact on a market that for months had become increasingly one-sided. The depth of the current sell-off will primarily be determined by how much speculators need to scale back long positions now that important support has been broken on both WTI and Brent crude.

Natural gas also saw strong buying as the recent rally above the 2 dollar mark has attracted renewed buying. Keep an eye out for a break back below 2.2 on the current front month of June as this could trigger a round of long liquidation by weak longs.

Now that the oil bubble has party burst the attention may turn to the  soybeans complex wih the net long currently corresponding to USD 25 billion in a market which has got a relatively small liquidity base.

Please click here for additional charts and information.