19 February 2018 at 8:34 GMT
Hedge funds trimmed bullish bets by 6% across 24 major commodities in the week to February 13. Across the board selling of energy and metals more than off-set continued buying among agriculture commodities.
- Bullish bets trimmed by 6% across 24 major commodities
- Energy and metals sold off across the board
- Continued buying seen in agriculture commodities
By Ole Hansen
Funds cut bullish energy sector exposure by a record 230,000 lots as traders reduced further what eventually had become an unsustainable record long across all oil and product futures. The biggest contribution came from natural gas were traders trimmed bullish bets by 25%. This came as record production and forecasts for milder weather helped send the price slumping towards key support at $2.5/therm.
The sharp correction in crude oil failed to attract fresh short-selling with both short and not least long liquidation being the drivers behind the combined 54,000 lot net-long reduction. This tells us that improved fundamentals have sharply reduced the appetite for naked short selling. Hence the strong bounce this past week when risk appetite returned and the dollar weakened.
Traders reduced bullish gold bets for a second week while re-establishing a net-short in silver. This as global stocks staged a comeback and traders worried that gold once again would struggle to break above the key area of resistance above $1360/oz.
Funds turned the least bullish on HG copper in nine months after chopping the net-long by 33%. This ahead of the China Lunar New Year holiday and before renewed dollar weakness sent the metal higher.
Drought in Argentina and the US Midwest supported another strong week of painful short-covering for funds who four weeks ago held a record short of 473,000 lots compared with just 25,000 lots last week.
In soft commodities the net-long in cocoa reached a 15-month high while short positions were cut in both sugar and coffee .
– Edited by Clare MacCarthy
Ole Hansen is head of commodity strategy at Saxo Bank