Article / 18 April 2017 at 10:35 GMT

COT: Heavy fund selling of grains, short-covering in oil — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
Denmark
By Ole Hansen

Hedge funds positioning during the week ending April 11 showed continued selling of all the major crops while the recent oil rally has primarily been driven by short-covering. Gold buying continued while the net-long in silver hit a new record. 

Speculative positioning in Commodities
 
Heavy hedge funds selling of agriculture commodities continued last week with the sector exposure hitting the biggest net-short in 13 months. This selling has hit the grains sector particularly hard with a net short now seen in all six contracts apart from soybean meal. 

Grains and soybeans
 Source: Bloomberg, Saxo Bank

Funds held a record exposure in silver following three weeks of heavy buying. The previous record from last July occurred at time when silver traded $20.30/oz, some 9% above the current level.

A fourth week of gold buying took the net-long to 140,407 lots, a five-month high. Mixed fortunes for platinum group metals with the platinum net-long at a near record low while palladium hit a 19-month high. 

Metals

 Source: Bloomberg, Saxo Bank


Crude oil was bought again with most of the change being driven by continued short covering. During the past two weeks the combined net-long in WTI and Brent crude oil has risen by 10% to 740,000 lots. The 69,000 lot increase was 50,000 lots from short-covering while new buying only contributed 19,000 lots. 

Crude oil

 Source: Bloomberg, Saxo Bank

The pressure on sugar began to fade following seven weeks of selling. However, increased selling and buying points towards raised volatility with funds increasing bets on both directions. Arabica coffee is just like sugar back to its long-term average in terms of positioning.

Cotton meanwhile has managed to stay elevated within a relatively tight range as the net-long falls for a second week from the March record.  Cocoa continues to struggle with the price back to the low on the year. 


Sugar
 Source: Bloomberg, Saxo Bank

— Edited by Martin O'Rourke

Ole Hansen is Saxo Bank's head of commodities strategy
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