Article / 20 February 2017 at 9:05 GMT

COT: Grains, oil spur near three-year buying high

Head of Commodity Strategy / Saxo Bank
Denmark
l A record oil net-long helped spur commodity bets to a near three-year high. Photo: Shutterstock

By Ole Hansen

Hedge funds increased bullish commodity bets to the highest since May 2014 during the week ending February 14. Surging post-WASDE demand for grains and a record oil long were the main drivers.Speculative positioning in Commodities
 
Fourteen out of the 23 commodity futures tracked saw buying, but as the following table shows, activity was concentrated in WTI crude oil and among the key crops. The metal sector was flat with selling of gold being offset by silver and copper buying. 

Speculative positioning in Commodities
 
Funds remain undeterred by the current lack of upside momentum in oil and last week they increased bullish WTI crude oil bets by 9% to a record 390,338 lots. A strong belief in Opec's ability to balance the market has so far been offset by the potential for rising production in Libya and the US. 

Speculative positioning in WTI Crude oil



















As a result of the continued buildup in speculative longs and a dwindling short base, the long/short ratio has moved above 10 while the net-long as a percentage of open interest now stands at 18%, both the highest readings since July 2014.
Speculative positioning in WTI Crude oil
The continued pick-up in the number of oil rigs being put to work in the US combined with a surge in producer hedging (selling) is a clear indication that US production, at current price levels, will rise over the coming months. 
Rigs and Producer gross short
 
Funds reduced bullish gold bets by 7,745 lots to 67,982 lots while increasing silver longs by 6,354 lots to a 20-week high at 70,746. While safe-haven demand for gold has been fairly muted so far, silver continues to enjoy rising demand with the recent surge in industrial metals, not least copper providing some relative support. 


Gold and Silver
 
A continued build up in cotton longs have increasingly left this relatively small contract in terms of liquidity exposed to long liquidation. On Friday, HGK7 broke the uptrend from late December and it extended a three-day selloff to $75.52 from the recent high of $78.45. 

Cotton
 
Funds have been returning to CBOT wheat during the past couple of months and the recent WASDE report help trigger some additional short-covering. This resulted in the net-short falling to the lowest level since November 2015 last week.

Funds have been net-short wheat since July that year.
 
CBOT Wheat
 
 — Edited by Martin O'Rourke

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

3y
ashrafj1 ashrafj1
so what is the expected for Cotton this week ?
3y
Ole Hansen Ole Hansen
Funds increased bullish oil bets in Brent crude to a record 481,399 lots last week. The combined gross-long in WTI and Brent exceeded 1 billion barrels for the first time ever.
3y
matsuri matsuri
so when will correction come? such large exposure risks unexpected slip of price.

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