Hedge funds continued their broad based commodity buying ahead of year end. This in response to improved growth and demand prospect following the US-China phase one trade deal. In addition the OPEC+ deal on December 6 to cut production further helped boost the energy sector. During the past three weeks speculators have accumulated WTI and Brent crude oil longs at the fastest pace since August 2017.
One of the few exceptions to the current buying spree is natural gas which saw the net-short across four Henry Hub deliverable contracts reach a fresh record short of 246k lots.
At the other end of the scale we found net longs reaching multi-months high in platinum (40 months), bean oil (38 months), coffee (37 months) and cotton (12 months).
Whether we are seeing a shift from macro based funds from short hedges against an economic downturn to long hedges against the prospect for higher inflation remains to be seen. The month of January will prove crucial in order to determine whether these bullish expectations can be maintained or whether the early parts of 2020 will deliver a reality check should data or news fail to support.