Energy: Most of last week’s commodity buying was concentrated in the energy sector, most noticeable crude oil and gas oil. OPEC’s bullish demand outlook for the second half combined with the OPEC+ groups ability to control the price, helped drive Brent above $70 while WTI reached levels last seen in 2018. In response to these developments hedge funds increased their combined crude oil net long by 25.2k lots to 649.5k, a three week high but still some 88k below the recent peak in February.
While the overall increase in both WTI and Brent was primarily driven by fresh buying, the bulk of the buying occurred in WTI. This in response to tightening US market amid increased demand for fuel and low stocks at a time where production is expected to show a much slower growth trajectory than the one we witnessed during previous cycles of rising prices.
Agriculture: Despite recovering strongly from the late May correction, only small changes were seen in soybeans and wheat. Corn received most of the attention with the 11% price spike driving a 21.8k lots increase, mostly due to short covering with potential buyers showing a degree of hesitancy as we move into the US growing season. In soft commodities, buying benefitted sugar, cocoa and coffee, and just like corn the net buying in coffee was primarily due to the short covering with buyers hesitating chasing the 7% rally seen during the week.