Speculative positions cut by 11% as confidence saps

Hedge funds and large investors pulled 5 billion dollars out of commodity futures and options last week. This was the biggest reduction in seven weeks on mounting concerns that the European debt crisis will reduce economic growth and demand for raw materials. In terms of number of contracts this was an 11 percent reduction to 952,000 lots. All sectors apart from metals saw reductions.

Bullish bets on oil rose to a six-month high even before the pipeline reversal was announced which boosted WTI crude further and caused short positions versus Brent crude to be closed. Heating oil rose again ahead of winter with gasoline reduced by the same amount. Speculators increased their shorts in natural gas by one-third to the lowest level in years as the chronic bear market continues amid ample supply and the short-term forecast of milder weather.

The agriculture sector suffered another week of selling with the net long across grains and soybeans falling to 185,000 lots the lowest level since July 2010 and down from a September peak of 700,000 lots. The net position of the soybean complex turned negative for the first time in more than three years while traders continued to add to already negative wheat positions. Corn long exposures dropped by 8 percent but remains the best supported with longs now standing at 221,000 lots.

The metal sector saw a small net increase in long positions. Copper returned to a net short but was offset by increases in gold, silver and platinum.

Speculative longs in soft commodities were trimmed again with sugar longs being cut by a quarter as continued weak price action reduced confidence.

Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs. Analysts and investors follow changes in these positions because such transactions can reflect an expectation of a change in prices.