03 October 2016 at 8:45 GMT
- Oil rallied following Opec announcement, but details of agreement have still to be reached
- Copper net position returns to neutral
- Very elevated bullish bet on natural gas position has left market vulnerable
By Ole Hansen
Hedge funds increased bullish commodity bets by 9% or more than 100,000 lots during the week ending September 27. Thirteen out of the 22 commodities tracked in this were bought during a week which began with the FOMC
leaving rates unchanged and where focus later moved towards Algiers and the prospect of a deal to cap oil production.
Short covering and new buying of WTI crude oil
was seen last Tuesday. This in the run up to the Opec
meeting in Algiers as the speculation about a deal intensified. Since the reporting date the open interest on WTI crude oil has risen to a near record, a confirmation that buying continued following the announcement.
Opec was initially rewarded for showing the ability to agree on something and crude oil rallied by 10%. But ahead lies the troubled discussions among the members about who will provide the cut backs needed to ensure a successful ratification of the deal on November 30.
The net-long in gold
jumped by 20% in response to an unchanged FOMC and softer US data. The renewed attempt to challenge resistance above $1350 and subsequent failure would have left recent established longs vulnerable and helped trigger the current weakness.
Back to the drawing board in HG copper as the net position returns to neutral. This following three weeks of short-covering from what was a near record short position. Copper, currently up by 4% year-to-date has been range-bound all year with the current boundaries being $2.08 to $2.24/lb.
A very elevated bullish bet on natural gas position has left the market vulnerable to long liquidation. Last week funds were net-buyers of the four natural gas contracts (futures and swaps) making up the basket of deliverable gas contracts into the Henry Hub delivery point in Louisiana. The latest weekly inventory report was supportive but the failure to hold onto the $3 handle helped trigger some selling ahead of the weekend.
— Edited by Clemens BomsdorfOle Hansen is head of commodity strategy at Saxo Bank