- Combined net long for 23 tracked futures has fallen 41% over the past 5 weeks
- Price weakness in oil, copper, grains and sugar has prompted short-selling
- All sectors except metals were sold in week to March 21
- WTI crude oil selling has taken the net long to a 16-week low
- Kuwait meeting of Opec and non-Opec producers left the oil market in doubt
- Gold trading higher today as USD fell after Trump's healthcare bill failure
Grain silos. Heavy selling of grains and soybeans persisted.
By Ole Hansen
Hedge funds kept up the selling pace in commodities last week. During the past five weeks, the combined net long across the 23 futures tracked in this report has been reduced by 41%. This has come in response to renewed price weakness, especially in oil, copper, grains and sugar.
In the week to March 21, the 149,000-lot reduction was primarily driven by increased short selling of 146,000 lots, while the long was reduced by 3,000 lots. All sectors, with the exception of metals, were sold.
Four weeks of WTI crude oil selling has taken the net long to a 16-week low. Gross longs are still being reduced while short-selling is on the rise. Crude oil is trading lower on Monday after a joint committee of ministers from Opec and non-Opec producers said they needed more time to stabilise the market. The fact that they agreed to review the market, instead of agreeing to an extension, has left the market in doubt about the ability to reach such an agreement.
Natural gas was in demand with the net long of the four Henry Hub deliverable contracts rising by 11% to a 34-month high.
Despite a post-FOMC recovery, the gold net long only recovered 24% of what was sold ahead the March 15 rate hike. Both long and short positions rose, leaving the net long higher by 16,136 lots.
Gold is trading higher today as the dollar weakened after US president Donald Trump's failure to push through his healthcare bill. The JPY is up by 1%, while bond yields and stocks are lower. With low investor participation seen so far, a convincing break above gold's 200-day moving average at $1,261/oz is needed to trigger a reaction.
High-grade copper was bought for the first time in five week, just before the mining strike in Chile ended.
Palladium touched a two-year high last week, helping to drive the net long to a 26-month high.
Heavy selling of grains and soybeans persisted. A big South American crop in soybeans and corn and jitters ahead of the prospective planting report on March 31 weigh on the sector.
Sugar, the hedge fund darling of 2016, continued to be sold, with the net long falling to a one-year low.
— Edited by John Acher
Ole Hansen is head of commodity strategy at Saxo Bank