COT: Energy bets reduced again as production rise weighs
Head of Commodity Strategy
To download your copy of the Commitment of Traders: Commodities report for the week ending June 5, click here.
Hedge funds cut bullish bets across 24 major commodities futures by 7% to 1.85 million lots in the week to June 5. The reduction was driven by continued selling across oil and fuels together with aggressive long-liquidation in soybeans, corn and cocoa.
Buyers were most noticeable in HG Copper (17-week high) and sugar where the net-short was cut to a 21-week low.
Increased political meddling with oil prices together with multiple uncertainties ahead of potential contentious meetings in Vienna on June 22 and 23 helped trigger a seventh weekly reduction in bullish crude oil bets. This the longest losing streak since 2013 saw both long and short positions reduced; the market is likely to remain rangebound ahead of Opec and non-Opec meetings which could trigger a major market reaction.
In WTI the net-long was cut by 3.3% to 313,000 lots, the lowest since last October. This as the discount to Brent stayed elevated due to the lack of midstream capacity to transport rising oil production from shale regions into the Gulf Coast. Net-longs in gasoline (RBOB) and diesel (ULSD) were also cut.
We saw a relatively quiet week in metals with gold struggling to break away from $1,300/oz ahead of the near-certain US rate hike on June 13. Silver showed signs of life with the XAUXAG ratio hitting a four months low. The net-long at just 4.3k lots has left plenty of space for additional buying should the technical and/or fundamental outlook (Industrial metals rally) continue to improve.
In HG Copper, strike threats to supplies from the world’s largest mine helped support a 63% increase in the net-long to 49,000 lots. With a 5% share of global output, the Escondida mine in Chile can on its own change global copper supply dynamics.
With the exception of wheat, funds turned sellers of corn and the soybean complex. The sector saw at 140,000 lots net reduction, not least due to a 89,000-lot reduction in the corn net-long. Tariffs speculation took its toll on soybean bulls while very strong readings on early growing conditions has seen December corn lose almost 8% during the past two weeks.
Softs were mixed with continued sugar buying taking the net-short to a 21-week low while in cocoa a 21% correction from the April 26 peak finally attracted some selling after bulls had stubbornly been holding onto an elevated net-long.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.