- Many commodity futures were under pressure in the week ended June 6
- Middle East tensions helped trigger a third weekly increase in bullish WTI oil bets
- Gold vulnerable to profit-taking after a record three-week buying spree
- Net short in coffee is getting close to the March 2013 record of 30,100 lots
The risk/reward in coffee and sugar is beginning to be skewed
to the upside after weeks of selling. Photo: Shutterstock
By Ole Hansen
Hedge funds cut bullish exposure across 23 US traded commodity futures and options by 6%, or 34,932 lots, in the week ending June 6. For a second week the bulk of the selling was driven by continued long liquidation of natural gas.
Selling elsewhere triggered multi-month and — in some cases — near record short positions in sugar, Arabica coffee, soybeans and soybean meal.
Middle East tensions helped to trigger a third weekly increase in bullish WTI oil bets, primarily due to short positions being reduced. The negative price action, however, showed the current bearish sentiment. An extension sub-$45 could be triggered by long positions capitulating. So far this has not been seen, with the gross-long remaining resilient above 300,000 lots.
Natural gas lost 10% while absorbing 155,000 lots of fund selling during the past three weeks. Last week the net long was cut by one-third.
Gold has been left vulnerable to profit-taking after a record three-week buying spree of 105,000 lots. In the week up to last Tuesday, the net long jumped by one-third as gold broke the downtrend from 2011. Increased nervousness was seen Thursday and Friday with the double top just below $1,300/oz triggering some profit-taking ahead of a critical week with the Federal Open Market Committee meeting on Wednesday.
The net short in CBOT corn was cut by one-third, the first sign of the risk to an overall near record grain short into the often volatile growing season.
The risk/reward in coffee and sugar is beginning to be skewed to the upside after weeks of selling. The net short in sugar reached a 22-month high, while the net short in coffee of 27,410 lots is getting close to the March 2013 record of 30,100 lots.
— Edited by Clemens Bomsdorf
Ole Hansen is head of commodity strategy at Saxo Bank