Article / 28 August 2017 at 9:00 GMT

COT: Metals shine in a week of widespread reductions — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
Denmark
  • Funds cut bullish commodity bets in week to August 22
  • Gold net-long, conversely, rose 9% to 196,331 lots
  • Agriculture 'particularly hard hit in recent weeks'

Houston
Houston flooded: the impact of Hurricane Harvey has yet 
to be fully understood by markets. Photo: Shutterstock

By Ole Hansen

Hedge funds cut bullish commodity bets by 18% in the week to August 22 as widespread reductions hit most commodities with the exception of metals, which continued to be bought. 

All energy contracts, grains and soft commodities were sold, not least WTI crude oil, corn, wheat, sugar, and coffee.

Speculative positioning in Commodities























Despite seeing gold's advance stall ahead of key resistance, funds nevertheless bought the yellow metal for a fifth consecutive week. 

The net-long rose 9% to 196,331 lots last week. This the biggest bet on rising prices since last October has been driven by continued demand from investors looking to diversify amid rising Trump uncertainty, a weaker dollar, geopolitical risks with the focus on North Korea, and the recent stock market wobble. 
Speculative positioning in COMEX Gold futures



















WTI crude oil was sold for a third week as traders began worrying that the third bull cycle since March was going to end in failure like the previous two. Ahead of Hurricane Harvey, gasoline net-longs were cut by 7% primarily due to a reduction in the gross-long. The net-long was 58% of the one-year high.

Oil and gasoline











The short term (let alone the long-term) impact of Hurricane Harvey has yet to be fully understood. The initial reaction has been to send gasoline higher as refineries halts production while sending crude oil lower on reduced refinery demand. Supplies of crude oil have also been impacted due to a reduction in supplies both from offshore and onshore (shale) producers. 

Lower imports should also be felt, but for now the real impact is yet to be determined with the refinery shutdowns receiving most of the attention. 

The agriculture sector has been particularly hard hit in recent weeks with funds holding a combined short positions in both grains and soft commodities. 

Grains and soybeans






















Hardest hit was CBOT corn where aggressive short-selling saw the return of a net-short position.
Speculative positioning in CBOT Corn
Soft commodities:
Soft commodities
 
The sugar net-short hit a record high after jumping 15%. This latest selling helps to explain the strong price bounce after the Brazilian government slapped a price supportive tax on excess imports of ethanol last week. 

This is a move that could help divert sugar cane demand away from the sweetener to fuel thereby potentially support a reduction in stocks.

Speculative positioning in Sugar
 — Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

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29 August
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