Article / 15 May 2017 at 7:33 GMT

COT: Oil surges on short-covering, metal longs cut — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
Denmark
  • Investors continue to retreat from commodities sector
  • WTI sells off as prices slump during week ending May 2
  • Silver 'particularly hard hit' as net-long hits 15-month low

Commodities
Money managers continued their retreat from commodities in the week ending May 2. 
Photo: Shutterstock

By Ole Hansen

Hedge funds' positioning across 21 major US commodities (ex. Brent and GasOil) has slumped by two-thirds following three months of selling. 

Speculative positioning in Commodities



















During the week, ending May 9 more than 100,000 lots were net-sold with the major futures contracts of WTI crude oil, RBOB Gasoline, gold, silver and copper all taking a hit. 

Speculative positioning in Commodities

 
Selling of WTI crude oil continued for a third week and the net-long has now halved during this time. Short-selling jumped 37% following the break below $47/barrel while new buyers also emerged. 

Short-covering is therefore likely to have been the main driver behind the rally seen following last Wednesday’s bullish inventory report.

WTI Crude oil

 
RBOB gasoline also vulnerable to short-covering after seeing a switch from a 33,000 lots long to a record 21,000 short in just three weeks.

RBOB Gasoline

 
The metal sector witnessed selling across the board last week. Gold selling accelerated with the net-long being cut by one-third as funds capitulated to the weakness seen during the past month. 

Silver has been particularly hard hit during this time with the net-long slumping from a record to a 15-month low.

Metals






















The grain sector was mixed with continued selling of corn being offset by soy and wheat buying ahead of last Wednesday’s WASDE report. 

Grains and soybeans
 
Soft commodities were also sold with the net-short in sugar expanding further following 11 weeks of non-stop selling. Cotton longs were rewarded as the WASDE report showed a bigger than expected drop in US stocks ahead of the autumn harvest. 

Cocoa surged higher last week on short-covering as quality concerns and unrest in the Ivory Coast lifted the price.

 

— Edited by Michael McKenna

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

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Ole Hansen Ole Hansen
Another sign that the current oil rally is being led by short-covering. Hedge funds cut the combined bullish oil bet in WTI and Brent by 72,000 lots to 475,000 lots last Tuesday. The gross-short surged by 71k lots while the gross long only saw a 1k lot reduction.

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