Article / 03 October 2016 at 8:45 GMT

COT: Oil back in demand ahead of Algiers meeting; gold longs jump

Head of Commodity Strategy / Saxo Bank
  • 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.
Speculative positioning in Commodities

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. 

Speculative positioning in WTI Crude oil
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.

Speculative positioning in COMEX Gold futures
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.
Speculative positioning in HG Copper
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.

Speculative positioning in Natural Gas
 — Edited by Clemens Bomsdorf

Ole Hansen is head of commodity strategy at Saxo Bank

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Commitments of Traders: Commodities

matsuri matsuri
still suprised that market believes OPEC. They (plus Russia) are producing at record levels so this initial upward reaction should fade soon.
Ole Hansen Ole Hansen
The market is currently being driven higher by technical buying and momentum, not least following the break of the downtrend in Brent crude oil earlier. The fundamental outlook remains challenging despite of the Opec deal and this is likely to keep the upside limited for now.
My comment to Reuters on this has just been published here:
Ole Hansen Ole Hansen
Hedge funds cut Brent crude oil net-long by 7% in week to Sept 27. Primarily driven by additional short-selling ahead of OPEC deal
Ole Hansen Ole Hansen
Funds increased combined bets on crude oil by 5% last week. A WTI gross-long increase more than off-set a gross-short increase in Brent
Pandorra Pandorra
I can't imagine that FOMC extremum reached on Aug-26 will be broken in CL futures.
Even tho I dunno who is the main in this world - Fed who against greenbacks total sales or OPEC blah-blah-blah spivs.


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