Article / 07 August 2017 at 10:16 GMT

COT: Oil long jumps to 15-week high, gold shorts flee — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Funds almost tripled bullish commodity bets over past 5 weeks
  • Demand increased for all three sectors — farm, metals and energy commodities
  • Oil and gold shorts squeezed
  • Buying of crude, products, metals and softs more than offset selling of crops
  • Crude oil has recovered in recent weeks, after another failed short-selling cycle
Oil pump jacks
 Crude oil has recovered strongly in recent weeks, and another 
short-selling cycle was abandoned. Photo: Shutterstock

By Ole Hansen

Hedge funds have almost tripled their bullish commodity bets during the past five weeks. All three sectors — agriculture, energy and metals — have seen renewed demand during this period as the US dollar weakened. Oil and gold shorts have been squeezed once again, while the recent pop in copper prices helped trigger a record net long.

Speculative positioning in Commodities

Buying of crude oil, products, metals and soft commodities more than offset a reduction of positions in key crops. 
Speculative positioning in Commodities
Crude oil has recovered strongly in recent weeks, and a third consecutive failed short-selling cycle was abandoned. The cycle of lower price lows witnessed since the first-quarter peak was broken towards the end of July, and that resulted in renewed buying interest. This led to an 18% jump in the net long last week to 282,000 lots, a 15-week high.

WTI Crude oil
Gold's July surge on a weaker dollar and a struggling Trump White House has seen the gross short collapse during the past couple of weeks. As a result, the net long has surged the most on record during this time, reaching 123,000 lots last week, close to the average seen this past year. 

As usual, a rapid reversal or build-up in positioning requires continued support from the market, and that was put in doubt on Friday after the strong US jobs report. So far, however, the market is holding up reasonably well, with support below at $1,247/oz yet to be challenged. 
Comex gold future

High-grade copper's recent rally to a fresh post-November high in response to improved Chinese economic data and the weaker dollar led to a surge in demand from macro and momentum funds. Last week the net long jumped 22% and breached 100,000 lots only for the second time since 2007. 

HG Copper
The grain sector has seen a sharp reversal of the early July surge, with the Bloomberg Commodity Grain index giving up all the gains seen during that time. This left funds holding unwanted longs after a three-week change in the wheat, corn and soybeans exposure from a 44,000 net short to a 246,000 net long in the week to July 25. As a result, these three major crops were sold despite continued support from dry weather conditions and the weaker dollar. 

Grains and soybeans

— Edited by John Acher

Ole Hansen is head of commodity strategy at Saxo Bank
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Commitments of Traders: Commodities

Vatsid Vatsid
Ole, Any commentary on Coffee?
Ole Hansen Ole Hansen
Coffee finding some resistance at its 200 day ma after retracing 61.8% of the Jan to Jun sell-off. Further upside risk remains in response to lower exports from Vietnam and Brazil combined with funds still holding a net-short.
Ole Hansen Ole Hansen
Soft commodities
Ole Hansen Ole Hansen
Funds increased total bullish oil bets (Brent & WTI) for a fifth week in week to August 1. This time by the most since December 6 last year when Opec/non-Opec production cuts were announced.
Pandorra Pandorra
Thank you so much Ole for recent posts incl and glad to see you again after summertime vacations.
Looks like all commodities GSCI / SPX ratio going to be recovered from very long-term bottom.


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