Energy: Speculators continued to sell into crude oil strength, not least Brent crude where the gross short rose to a near three-month high at 80.2k lots. A 12% jump in the price of natural gas also failed to attract fresh buying with the net long instead falling by 8% on a combination of profit taking and fresh short selling.
Metals: Big jumps in the speculative length of gold (+46%) and silver (+49%) left both metals exposed to the end of week reversal in US real yields and especially gold’s inability to mount a proper attack on resistance above $1800. Copper’s 4.6% correction only triggered a small amount of selling which is interesting given the number of recent established longs having been caught offside.
Agriculture: The grains sector saw another week of buying and this time length was added to all the six contracts led by corn and the soybeans complex. The soft sector was generally hit by profit taking as speculators sold into rising markets, especially sugar where a 4.2% price jump was met by a 8% reduction in the net long to 163k lots, a 40% reduction since August.
Latest comments from our Market Quick Take, published daily here:
Crude oil has started the week trading mixed ahead of Thursday’s OPEC+ meeting and after Biden told the group to “pump more oil”. Whether or not that will change the groups 0.4m b/d per month increase remains to be seen, but it has raised speculation it could increase the chances of an Iran nuclear deal. Also, over the weekend China released diesel and gasoline reserves in order to try and curb domestic prices. The market will also watching EU and Asian gas price developments as well as Wednesday’s weekly EIA stock report, where a sharp reduction at Cushing in recent weeks has resulted in elevated WTI time spreads as the market worries about low supplies at this important delivery point. In the week to October 26, specs cut bullish oil bets for a third week, and despite trading near multi-year highs the current 600 million barrels long (WTI & Brent) is now 136 million barrels below the February and June peaks.
Gold dropped the most in two weeks on Friday on elevated swings in US real yields. An example being the ten-year tenor which jumped to –0.9% after reaching –1.15% on Thursday. Surging short-end interest rates have raised concerns central banks are losing control and with this in mind precious metals will be trading nervously ahead of central bank meetings this week from the FED, RBA and BOE, where the market will be focusing on the pace of tapering and any guidance on future rate hikes. From a technical perspective, gold needs to hold above the 21-day moving average at $1777, as a break below could signal further loss of momentum.