06 November 2017 at 8:26 GMT
Hedge funds continued the rotation out of grains and metals into energy during the week to October 31. The combined net-long across oil and products jumped to the highest since February, especially driven by strong oil demand. Outside oil and products major reductions were seen in
- Continued the rotation out of grains and metals into energy
- Combined net-long across oil and products jumped to highest since February
- Big reductions were seen too in natgas, silver, corn and wheat
- Wheat while sugar and cattle were bought
By Ole Hansen
natgas, silver, corn and wheat while sugar and cattle were bought.
The net-long in crude oil across the four contracts tracked in this reached 840,000 lots, the highest since March 7 and not far from the 930,000 lots record reached on February 21.
Funds bought another 23,500 lots in Brent crude to bring the net-long to a fresh record of 530,000 lots. WTI crude oil, however, saw the strongest demand with the net-long on the ‘big’ CME contract rising by 20% jump while the lower liquidity contract on ICE, often used for spread trading, jumped by 37%.
In natural gas, a five-month stretch of range-bound trading between $2.85 and $3.10 has taken its toll on traders' belief in higher prices the coming winter. A third straight weekly decline, however, was avoided when the forecast for cooler U.S. Midwest weather helped the contract recover back to $3.
Gold and silver were net-sold ahead of last week’s event risks from FOMC meeting and new Fed chair nomination to tax reforms and US job report. Despite having settled into a $1263 to $1282 range gold was sold for a seventh week during which time the net-long has been cut by 37%. Funds have maintained an almost unchanged position in silver during the past five weeks.
Wheat and corn continued to attract fresh selling and long liquidation. Wheat not least after falling to a new contract low on the December contract last Tuesday.
Soft commodities were all bought with sugar seeing a 29% reduction in the net-short. This following what turned out to be a failed upside break on October 27.
– Edited by Clare MacCarthy
Ole Hansen is head of commodity strategy at Saxo Bank