Energy: The tailwind from the surprise Saudi production cut saw speculators increase crude oil longs in WTI and Brent by 43.4k lots to 667.4k lots, a one-year high. The net has now almost doubled since the early November vaccine announcement which helped increase hopes for a return to normal fuel consumption. A hope that is currently being challenged by continued and prolonged lockdowns across key consuming nations.
Latest: Crude oil (OILUSFEB21 & OILUKMAR21) trade softer but so far without breaking any significant levels. Hopes about a speedy recovery in fuel demand continues to be challenged by lockdowns and the continued rapid spreading of Covid-19. Focus this week on IEA’s Oil Market Report Tuesday and Biden’s inauguration and how soon he can roll out his fiscal stimulus plan. Support in Brent at $54/b the trendline from the November low.
Precious metals led by gold saw a dramatic reduction in net longs after speculators were spooked by the surge in ten-year bond yields above 1% and a stronger dollar. The 13 bp jump in real yields, a key driver for gold, and the accompanying slump back below $1900/oz helped trigger a 31% reduction in the net long to 105k lots, almost the smallest bet on rising prices since June 2019. Despite weakening by 8%, the silver long was left relatively unscathed as the net-long was reduces by 9% to 43k lots, a six-week low.
Latest: Gold (XAUUSD) and silver (XAGUSD) extended their Friday slump on the Asian opening before bouncing strongly to trade higher on the day. On top of last week’s dollar and yield strength a comment from incoming Treasury Secretary Yellen, that the administration is not seeking a weaker dollar, further spooked the market in early trading. However, with real yields back below –1%, the short-term outlook hinges on the dollar with gold facing resistance at $1855/oz.
Grains: Ahead of last week’s WASDE report which triggered another upside price extension led by corn, speculators had reduced longs in soybeans and wheat while increasing the corn long to a ten-year high at 374k lots. Overall the total sector long which include meal, oil and KCB wheat was cut by 12k lots to 790k lots, the first reduction in six weeks.
Latest: US trade grains and soft commodity markets are closed today for Martin Luther King Jr Holiday. Once the markets reopen they will continue to focus on the price impact of Argentina's decision to suspend corn shipments and Russian plans to impose export duties on grains in order to curb rising domestic food prices triggered by the Covid-19 crisis.