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John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Article / 14 May 2018 at 7:59 GMT

COT: Oil at three-year high triggers continued fund selling

Head of Commodity Strategy / Saxo Bank
Denmark
By Ole Hansen

Hedge funds cut bullish commodities bets for a third week as the stronger dollar created headwinds for metals while surging crude oil prices continued to attract profit-taking. Staying with energy, demand for oil products continued to rise while natural gas was cut by one-quarter. 

Grains were mixed with soybeans selling being more than offset by strong pre-WASDE buying of corn and wheat. 

COT

















While crude oil rallied hard on the back of President Trump's decision to leave the 2015 nuclear agreement, hedge funds took to opportunity to reduce bullish bets for a third consecutive week. During this time the combined net-long (using four oil contracts on CME and ICE) has dropped by 88,000 lots to 1 million, an eight-week low.  

Crude oil



















Demand for products, however, continued with the net-longs in gas oil, gasoline, and diesel all rising.

Products
 
Gold and silver put up a fight against the stronger dollar with both managing to hold onto key support at $1,300/oz and $16/oz. respectively. Despite a small amount of net-buying in gold, the gross-long nevertheless dropped to just 118,000 lots, a 26-month low. 

On that basis funds have now been left unprepared for a potential move higher with the technical focus on $1,326/oz, the 38.2% retracement of the April to May sell-off. 

Gold and silver
 
Three weeks of copper buying came to a halt as the stronger dollar and US-China trade impasse weigh on both sentiment and prices. 

Copper
 
China trade jitters resulting in less demand for US soybeans, meanwhile, helped trigger the largest weekly sell-off since December. Funds flipped their position in wheat back to a net-long but it is unlikely to have survived the week. This after selling pressure mounted following Thursday’s WASDE report which showed a surprise rise in US wheat production despite the poor condition of winter wheat. 

Corn, soybeans, wheat
 
In soft commodities the elevated short positions in both sugar and coffee continued to be reduced while cocoa buyers paused following 15 consecutive weeks of buying.

Cocoa
 

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

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Leveraged funds positioning covering the week ending May 8, 2018

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