07 November 2011 at 9:04 GMT
Hedge funds and large investors reduced their long exposure by 2.7 percent to 1,026,000 futures and options contracts last Tuesday. This was the first reduction in four weeks and it leaves their exposure at nearly half the size experienced during January this year. Europe’s failure to contain its debt crisis is hurting the prospect for economic growth and thereby demand for raw materials.
Energy exposure was reduced by 6 percent primarily due to bearish bets on Natural Gas being raised to the highest levels in five weeks. Stockpiles ahead of the winter season could reach a new record high which, unless a colder than normal winter emerges, could put prices under further downside pressure. Crude oil longs were trimmed with traders booking profit after a strong run up.
Exposure to metals, especially gold, increased strongly with traders being the most bullish in three weeks as buyers returned after the rout. The Greek tragedy has increased the risk of contagion to other weak European nations and the perceived safety of gold is being sought once again. Copper positions swung back to positive as the recent strong rally forced traders to wipe out their shorts and begin rebuilding longs.
The grain sector saw negative bets on wheat rising again while long exposure to soybeans was cut to the lowest level in 16 months ahead of an important USDA report 9 December which should show a healthy build up in global stockpiles of soybeans.
Long exposure to the meat sector was reduced for the first time in two months after a price correction triggered some long liquidation.
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.