Article / 03 April 2017 at 7:28 GMT

COT: Commodity exposure halved in just six weeks — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  The combined net long in commodities (ex-Brent and gas oil) 
has halved since mid-February. Photo: Shutterstock

By Ole Hansen

Hedge funds selling of commodities extended into a sixth week and the combined net-long (minus Brent and gas oil) has now halved during this time. During the week ending March 28 the selling in energy slowed while buyers returned to metals.

The agriculture sector meanwhile remained under pressure with nine out out of the 13 futures being sold.

Speculative positioning in Commodities
Speculative positioning in Commodities

The selling has been particularly apparent in the grains and soybean complex. During the past six weeks the combined position across the six futures in this sector has changed from a 380,000 lot long to a 245,000 short. 

The selling was widespread as traders anticipated a bearish *Prospective Planting Report' from the USDA last Friday. In the end the survey covering 83,000 farmers planting intentions raised the acreage for soybeans at the expense of wheat and corn. Due to the elevated bear bets, especially in corn and wheat, these two crops could see some short-covering over the coming days. 

Speculative positioning in grains
WTI crude was sold for a fifth week with net-long now reduced by 41% from the February 21 record. The long/short ratio dropped to 3.1 from a recent peak at 11.5 and these developments helped trigger the strong recovery last week in response to supportive news on production and demand.

Having seen both WTI and Brent crude oil retrace half of what was lost during March, we may now see the market consolidate while waiting for further news on compliance, Libya and US production and inventory levels. 

Speculative positioning in WTI Crude oil
Gold and silver were both bought with silver outperforming gold on the week. The failure however by gold to make it back above its 200-day moving average at $1,260/oz has made it vulnerable to a correction with focus on $1,236/oz followed by $1,228/oz
— Edited by Martin O'Rourke

Ole Hansen is Saxo Bank's head of commodities strategy
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Commitments of Traders: Commodities

Dear Ole, thanks for the update. What do you think about natural gas?
Ole Hansen Ole Hansen
Money managers cut bullish Brent crude oil bets by 7% to 373k lots in week to March 28. This the lowest exposure since November 29 was driven a 24k reduction in gross longs and a 5k addition to the gross-short. The combined net-long in Brent and WTI was cut by 41k to 642k lots. Following five weeks of selling the net-long has now been reduced by one-third.
Morris Morris
Can this be discussed in line with what the commodities in question did in the corresponding period? This is so we can see whether these positions are leading or lagging?


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