29 January 2018 at 8:19 GMT
- Record long spec positions by hedge funds in oil and products
- Energy buying and short-covering in soybeans offset reductions elsewhere
- Reductions were seen in copper and sugar
By Ole Hansen
A full house of record longs in oil and products was the main feature in last week's update on speculative positions held by hedge funds. The total net-long across 24 commodities rose by 3% with energy buying and short-covering in soybeans offsetting reductions elsewhere, not least in copper and sugar.
The biggest change and the story of the week was the full house of new records recorded in the five oil and product futures. The combined net-long across the five contracts reached 1.4 million lots with Brent and WTI accounting for close to 1.1 million lots.
The call for a crude oil correction has so far been left unheard despite the increased risk of such a one-sided position. The fact however remains that funds will continue to buy into strength until the music stops. This past week gave the bulls no cause for concern as the dollar weakened, worldwide growth was cheered in Davos and US crude stocks continued to decline.
The NatGas net-long jumped 24% in response to surging prices and plummeting stocks amid very strong winter demand. The first three weeks of January has seen natural gas stocks slump by 830 billion cubic feet compared with 513 bcf for the same period last year.
Gold was bought for a sixth week with the net-long reaching a four-months high. Silver, meanwhile, continued to struggle with investors cutting longs while adding fresh short positions.
It was a roller coaster week for HG copper which saw a cut in the net-long by 34% in response to the slump last Tuesday. The change which was driven by long liquidation and fresh short-selling occurred after a big jump in LME inventories and a technical break which sent the metal sharply lower before recovering later in the week as the dollar slumped.
The tailwind from a rallying gold supported an increase in the platinum net-long to an 11-month high. Platinum's discount to gold has narrowed by 37 dollars this month after hitting a record low at $375 on December 29.
The grains sector was net-bought with the buying concentrated in the soy complex and to a lesser extent corn. The weak dollar-supported rally only occurred after data for this report had been collected.
Cotton's running out of stem has left it vulnerable to a correction. Not least considering the elevated net-long and long/short ratio.
– Edited by Clare MacCarthy
Ole Hansen is head of commodity strategy at Saxo Bank