COT: Strong buying of WTI; Subdued gold interest

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, May 19. A week were the questionable Moderna vaccine promise and reduced lockdowns spurred continued demand for riskier assets. US stocks resumed their rally with the S&P 500 rising by 2.3% while bond yields traded softer and Dollar index lost 0.6%.

The Bloomberg Commodity Index jumped 2.7% to reach a one month high with all the major energy and metal futures posting strong gains. However, while the energy and metal sectors had a strong week the net-long across the 24 major commodity futures tracked in this was close to unchanged due continued selling of most agriculture commodities.

Energy: Another strong rally in crude oil saw the combine net long in WTI and Brent rise by 26k lots to 507k lots, a 16-week high. Seven consecutive weeks of buying has resulted in bullish WTI bets rising almost three-fold to 348k, a 20-month high, while Brent buyers have only added 102k lots to 158k. While not yet overly stretched, the amount of buying has left the market exposed should the technical and/or fundamental outlook turn less friendly. Buying interest in Brent has been much more muted.

Following a four-week rally WTI crude oil has temporarily been boxed in between resistance at $35.20/bbl, the April high and support at $30.75/bbl, the uptrend from the lows. How the market handle these two levels will give us a clue about the current strength of sentiment in the market.

Buyers returned to natural gas following the recent slump. The 6.4% price jump attracted 24k lots of fresh longs resulting in the net long rising to 136k lots.

Metals: Silver’s 14% surge helped drive a 54% increase in the net-long to 21k lots, the highest since March 17. Gold investors meanwhile continued to flock to bullion-backed ETFs while funds only added 12.3k lots to their futures net-long. Despite hitting a fresh multi-year high on escalating tensions between US and China, and the potential for further stimulus, the net-long at 173k lots remained close to an 11-month low.

Copper traders was the least bearish since January as the price popped higher to reach a two-month high on China housing data and virus hopes. The net-short was cut by 26% to 9.7k lots.

Agriculture: Broad selling of food commodities continued with just four out of 13 futures contracts being bought. All the three major crops were sold, not least corn which saw a 15% increase in the net-short to 245k lots, a one-year high. One of the few exceptions was sugar as the continued rally in crude oil potentially could divert sugar canes back toward ethanol production instead of the sweetener.