Article / 01 May 2017 at 7:18 GMT

COT: Oil longs losing patience, grain short hits record — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • WTI crude the biggest decliner as commodities sell off in week ending April 25
  • Silver sees net-selling on post-French election weakness versus gold
  • Heavily sold corn, wheat at risk of a short squeeze on any positive news

Silver was heavily sold in the week ending April 25 as prices 
remain very soft relative to gold. Photo: Shutterstock

By Ole Hansen

Hedge funds were broad-based sellers of commodities in the week to April 25. All sectors were net-sold with 17 out of the 23 futures tracked in this being sold. The biggest casualty was WTI crude oil and this time round the selling were led by long liquidation more than new short selling, an indication of bulls losing patience. 

Speculative positioning in Commodities
The energy sector saw selling of all five contracts, particularly WTI crude oil where traders reacted to renewed price pressure. Three weeks of buying was almost reversed in one week as the market responded to fading geo-risks, rising US production, and product stocks. 

This time round the reduction was driven by record long liquidation more than new short selling – an indication of bullish traders beginning to lose their patience. Rising stockpiles of RBOB Gasoline helped trigger a 39% reduction in the net-long. 

WTI Crude oil
Natural gas traders maintained an elevated bet on rising prices despite seeing the front month come under pressure, only to find support ahead of $3/therm.

Natural Gas

Silver’s underperformance against gold before and after the French election helped trigger a second week of net-selling from what was a record long at the beginning of April. Gold was net bought for a sixth week but with selling interest also on the rise, the net-change was only 2%.


Agricultural commodities remained under pressure with selling seen across most commodities. The net-short among key crops hit a new record of 463,000 lots with elevated short positions seen in both corn and CBOT wheat. This has left both increasingly at risk of a short squeeze on just a small change in the current negative outlook.  

Wheat, which jumped higher overnight in response to slow planting progress and a late season blizzard hitting key growing areas, is particularly vulnerable to such a development. The break above $4.40 on ZWN7 triggered short-covering from funds holding a record gross-long of 238,000 lots

Grains and soybeans

The sugar net-long returned to neutral with the net-long being cut by 56% . Sugar could be due for a correction following 12 straight weeks of selling, the longest run of losses since 1961. It jumped 5% on Friday after finding support at 15.4 cents/lb, the 61.8% correction of the 2015-to-2016 surge. 

The net-short in Arabica coffee continued to expand following a week where Robusta led the weakness. 

Soft commodities

— Edited by Michael McKenna

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

Ole Hansen Ole Hansen
Oil events during May:
EIA monthly report: May 9
Opec monthly report: May 11
IEA monthly report: May 16
Opec meeting: May 25
EIA 'Weekly Petroleum Status Report' each Wednesdays at 14:30 GMT.
Cat Cat
Hello Ole. You mentioned the WASDE Report on a recent call. Does the market tend to move on the publication of this report? I pulled up the last one and just wondered how much the market tries to price in any anticipated moves in advance. If easier, I can give you a ring.
Ole Hansen Ole Hansen
Hi Cat. Just like any other report be it macro data or oil inventories where surveys have been conducted the market will very much try to price in the result in advance. The WASDE report can often be a major market mover depending on how much it surprises relative to surveys, the prevailing trend and positioning in the market. Some are anticipated with more interest depending on the time of year.
Ole Hansen Ole Hansen
Funds cut bullish bets on Brent crude oil by 69k lots (Long -50k, short +19k) in wk to April 25. The combined long in WTI and Brent were cut by 17% or 139k lots (Longs -103k, shorts +37). This was the third biggest weekly reduction on record and just like WTI the reduction in Brent last week was primarily driven by longs getting out instead of new sellers getting in.
Cat Cat
Thank you.


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