Article / 30 October 2017 at 9:00 GMT

COT: Oil and products in demand; metals and grains falter

Head of Commodity Strategy / Saxo Bank
  • Bullish crude oil bets rose by 23,000 lots – both WTI and Brent were bought
  • Interesting week ahead with key technical resistance at $61/barrel
  • Gold was sold on rising headwinds from a stronger dollar and rising bond yields

By Ole Hansen

Hedge funds cut bullish bets on 26 commodity futures by 1% during the week to October 24. Buying of oil, gasoline and cattle were more than offset by continued selling of grains, metals and softs. 

Speculative positioning in Commodities
Bullish crude oil bets rose by 23,000 lots with both WTI and Brent crude being bought. The net-long in Brent crude returned to a near record level ahead of the end-of-week push above $60/b. Brent crude oil has now rallied by more than one-third since June and in the process retraced 38.2% of the 2014 to 2016 selloff. Interesting week ahead with key technical resistance at $61/b standing in the way for funds betting on seeing $65/b before $55/b.

Speculative positioning in Crude oil
Bullish exposure in both gasoline (RB) and low sulphur diesel (HO) remained elevated.
Speculative positioning in products
 Gold was sold for six weeks on rising headwinds from a stronger dollar and rising bond yields. Interestingly enough the selling appetite despite these challenges was muted with the net-long down only 1% with the gross short being reduced as well. 

HG copper meanwhile was net-bought for a third week but without much conviction as both long and short positions were reduced ahead of the annual LME week in London. This annual gathering of who's who within the industrial metals sector often results in lower liquidity and potentially higher volatility. 

Speculative positioning in metals
The grain sector remains the most shorted on ample supply pressures. Not least corn and wheat as both struggle to recover from December contract lows.

Despite seven weeks of buying and a 12% rally since August funds maintained a net-short in cocoa. Buying did accelerate last week with the net-short being cut by 49% to 9,483 lots.

Arabica coffee continued to attract fresh selling. Last week the net-short rose to a record 46,000 lots after the price hit a four-month low. On that basis it could now be viewed as a potential recovery candidate should the price manage to find support.

– Edited by Clare MacCarthy


Ole Hansen is head of commodity strategy at Saxo Bank


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