Article / 23 October 2017 at 7:38 GMT

COT: Brent/WTI diverge, gold sold despite geo-risks — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Funds buy natural gas, copper, soybeans in week to October 17
  • Diverging investor interest between WTI, Brent crude resumes
  • 'Gold sold for a fifth week with the gross-short rising to a three-month high'

Geopolitical risks, including the potential fragmentation of Northern Iraq, continue to loom large but gold bets did not respond in the week to October 17. Photo: Shutterstock

By Ole Hansen

Hedge funds increased bullish bets across 26 major commodity futures by 3% in the week to October 17. Buying was concentrated in natural gas, HG copper, and soybeans while sellers were seen in WTI crude oil, wheat and corn, as well as sugar. 

Speculative positioning in Commodities

The diverging investor interest between WTI and Brent crude oil resumed with the difference in the net-long rising to a record 275 million barrels. This despite seeing the smaller oil contracts of WTI on ICE and Brent on CME indicating continued interest to trade a narrowing spread between the two benchmarks.

Position gap between WTI and Brent

Geopolitical risks related to Iran and Northern Iraq helped trigger this divergence with plenty of US supply, not least at WTI delivery hub Cushing, suppressing US crude oil relative to the global prices represented by Brent crude oil.  

Speculative positioning in Crude oil

Bullish copper bets rose by 15% ahead of the 19th Congress of the Chinese Communist Party. The change, however, was almost solely driven by short-covering which left the price exposed to the long liquidation following President Xi’s speech last Wednesday.

Speculative positioning in COMEX Copper

Gold was sold for a fifth week with the gross-short rising to a three-month high. The fresh short-selling occurred while gold temporarily traded back above $1,300/oz on geopolitical worries. 

Speculations about a hawk being chosen as the next Federal Reserve chair and renewed focus on a US tax deal supported the dollar while eroding support for precious metals.

COT on precious metals

The recent WASDE report on supply and demand for US and global grain and soybeans helped trigger a 120% jump in the soybean net-long while the corn and wheat net-shorts expanded further.

COT on grains

Cocoa’s relentless move higher since August continued to attract short-covering from funds who have maintained a net-short since last December. Improved global demand and falling stockpiles at warehouses monitored by the ICE Exchange and rain concerns in Ivory Coast have all helped support the price.

No joy for coffee, however, with traders increasing the net-short to a 16-week high to 93% of the one-year high.  

COT on soft commodities
A replay of last week's webinar on commodities can be found here.

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

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