John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Article / 04 June 2018 at 8:24 GMT

COT: Oil selling accelerates; Funds double up on gold

Head of Commodity Strategy / Saxo Bank
By Ole Hansen

Hedge funds cut bullish commodities bets by one percent to 2 million lots in the week to May 29. This was driven by a rotation out of energy into metals and agriculture commodities. All six energy related futures contracts, not least crude oil, were sold leaving the sector’s net-long down by 127,000 lots. Against this 32,000 lots of metals, not least gold and 76,000 lots of agriculture commodities led by sugar were bought.
040618 COT
040618 COT
Saudi Arabia and Russia’s recent signal that production cuts could be eased helped sent crude oil sharply lower during the week. Five consecutive weeks of selling became six with last week’s selling being the most aggressive seen so far in this current cycle. The combined long in Brent and WTI crude oil was cut by 101k lots to 823k lots, the biggest one-week reduction since last August and the lowest exposure since September. 
040618 COT
Buyers returned to gold with a vengeance last week with the net-long more than doubling to 61k lots. Fridays stronger-than-expected US job report combined with a certain US rate hike on June 13 left the metal struggling on Friday as recently established longs got flushed out. This also following the failure earlier in the week the break above $1308/oz, the 200-day moving average.  
040618 COT
Grains led by wheat were net bought with funds now holding the biggest seasonal net-long in the three major crops of soybeans, corn and wheat since 2011. The sector is currently being supported by unfavourable weather which risks reducing yield and production while also being caught in the crosshairs as trade war fears re-emerge. Mexico is US’s biggest buyer of its corn and China of its soybeans. 
040618 COT
Sugar was bought for a fifth week and what was a record short back then has now been reduced by 57%. The recent rally has been supported by a national strike led by truck drivers in response to rising fuel cost which caused shipment delays and forecasts for lower Brazilian production. The cotton net-long saw a 4% reduction despite going limit up on May 29 amid crop concerns from both the US and China. Despite cocoas recent 17% slump the net-long remains elevated at 96% of the recent peak.
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