Article / 26 June 2017 at 7:12 GMT

COT: Broad-based commodity selling picking up speed — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
Denmark
  • Hedge funds cut bullish exposure across 23 US traded commodity futures 
  • The net-long in WTI crude oil dropped by 31% as short sellers went on the attack 
  • Gold and silver selling accelerated after hawkish FOMC rate hike on June 14
  • The net short for CBOT wheat has hit the lowest since November 2015


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Gold selling accelerated after the hawkish Fed rate hike 
in mid-June. Photo: Shutterstock 

By Ole Hansen

Hedge funds cut bullish exposure across 23 US-traded commodity futures and options by 26%, or 175,000 lots, during the week that ended June 20. This occurred during a week when continued selling, not least in oil, saw the Bloomberg Commodity Index hit a 14-month low. 

With the exception of wheat, soybean oil and palladium, most other futures contracts were sold with the net short in several reaching the highest for at least 12 months.

Speculative positioning in Commodities
 
The net long in WTI crude oil dropped by a significant 31% as short sellers went on the attack, while longs continued to capitulate. Rising supply, especially from Libya and Nigeria combined with rising US inventories further reduced the markets belief that Opec would successfully manage to balance the market. 

However, with the net long and gross short both hitting 10-month highs, the risk is once again beginning to be skewed to the upside. Much still depends on the weekly US inventory report, which for the past three Wednesdays triggered major selloffs.

WTI Crude oil
 
The producers' gross short dropped 8% last week to the lowest since December, a sign that current low prices are not attractive from a hedging perspective: a development that could see US production growth estimates for 2018 being revised lower.

Producer gross short in WTI crude oil
 
Gold and silver selling accelerated after the hawkish Federal Open Market Committee rate hike on June 14. The silver net long was cut by 39% as longs were reduced and shorts were added.

Metals
 
Gold meanwhile has seen a repeat of what happened during the May correction. Once again, the reduction was purely driven by reductions in the net long, while no new short-selling was seen. We conclude that selling appetite and the belief that gold will go lower remains low at this stage.

Speculative positioning in COMEX Gold futures
 
Deteriorating crop conditions for CBOT wheat has seen the net short hit the lowest since November 2015.

Grains and soybeans
 
The net short in Arabica Coffee hit a fresh record, while in sugar it reached a two-year low.

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– Edited by Gayle Bryant

Ole Hansen is head of commodity strategy at Saxo Bank 
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Commitments of Traders: Commodities

2y
Market Predator Market Predator
MP is glad you're back in Denmark, Sir. Congrats to your APAC mission.
2y
Ole Hansen Ole Hansen
Thank you very much MP. Good to be back

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