Energy: Crude oil’s recent breakout but subsequent failure to gain momentum due to renewed virus worries in Asia saw the combined net-long in crude oil rise by just 9,134 lots to 670k lots. Buying of Brent being offset by selling of WTI, primarily due to fresh short selling.
Latest: Crude oil trades softer as the dramatic virus flare-up in India may cut its fuel demand by 20%, thereby offsetting a continued recovery in demand from U.S. and China, the worlds’ top two consumers. However, despite the prospect for additional OPEC+ barrels hitting the market next month, a firming backwardation in Brent, the global benchmark, still points to a market that can absorb additional supply as fuel demand continues to grow into the second half. Technical levels in Brent are $68 to the upside while support is being defined by the 21- and 50-day moving averages just below $65. Apart from further developments in India, the focus this week will be on Wednesday with FOMC and OPEC+ meetings potentially setting the direction.
Metals: Buyers returned to most metals, both precious and especially industrial metals led by copper which was bought in response to the recent technical breakout. The net long rose 18% to 45k lots, still less than half the recent peak from December. Silver enjoyed the tailwind from industrial metals with the net-long rising 19% while gold’s recent break above $1765 only managed to trigger a disappointing 7% rise in the net long to 69k lots. With gold in a downtrend since last August, it highlights the metals continued struggle to attract a fresh momentum bid.
Latest: Gold (XAUUSD) trades rangebound after losing momentum ahead of $1800 while support in the $1760-65 area remains firm. Copper (COPPERUSJUL21) and Iron Ore (SCOc1) meanwhile jumped to the highest since 2011 and 2013 in Asia on expectations supply will tighten further as the global economic recovery gains traction. Copper remains an integral part of the green-energy transition and expectations are pointing to years of mismatch between inelastic supply and growing demand. Above all individual drivers, the focus will be on Wednesday’s FOMC meeting and its potential impact on the dollar and yields which have both been trading softer recently. In gold, lack of enthusiasm in ETF’s and speculators in COMEX futures an indication that large scale short covering from longer term trend funds and renewed momentum buying has not yet emerged. For that to happen gold as a minimum need to break above $1815.
Agriculture: Bullish corn bets saw a small reduction from a ten-year high while wheat and especially soybeans attracted fresh buying. Overall the combined long in the three key crops once again touched a near record high at 558k lots. A level beyond which speculators have not been prepared to increase positions despite a continued price surge. An 8% rally in sugar saw the net-long increase by 25% to 223k lots while coffee’s recent newfound bid helped drive the net length higher by 74%.
Latest: Grain prices extended their recent run of gains ahead of the weekly planting progress from the USDA tonight at 20:00 GMT. The Bloomberg Grains Index is trading at a fresh eight-year high with overnight gains seen in all the major crop futures contracts traded in Chicago which during the past week all reached fresh multi-year highs. These developments being driven by a combination of already low stock levels due to rampant Chinese demand and a record cold snap delaying U.S. planting while hurting some winter wheat areas. To top it all up, Brazil is recording declining crop conditions due to drought.