COT: Grains in demand as oil and gold are sold

Ole Hansen

Head of Commodity Strategy, Saxo Bank Group
Ole Hansen joined Saxo in 2008 and has been Head of Commodity Strategy since 2010. He focuses on delivering strategies and analyses of the global commodity markets defined by fundamentals, market sentiment and technical developments.

Hedge funds reduced bullish commodities bets for a second week. The modest 2% or 46k lots reduction disguised a rotation out of energy (crude oil) and metals (all) and into agriculture, not least the three major crops of soy, corn and wheat.

COT 07 May 2018

Both WTI and Brent saw long liquidation despite the ongoing support from geopolitical worries related to Trump’s May 12 decision on Iran. Some traders opted to cut longs given the potential binary outcome and the risk premium already built into the current price.

Focus this week: Crude oil’s geopolitical risk premium continues to build with traders gearing up for a worst-case scenario ahead of Trump’s Iran move. Stepping away from the 2015 nuclear deal risks raising Middle East tensions while curbing production from Opec’s third biggest producer. 

COT 07 May 2018

The stronger dollar and pre-FOMC jitters took its toll on metals, both precious and industrials. Gold’s net-long was cut by 55% to just 52k lots, the lowest since last July, while silver traders flipped their silver long straight back to a net-short. Aggressive selling was also seen in platinum while three weeks of copper buying came to halt.

Focus this week: Geopolitics with Iran sanctions and troubled Chinese trade talk providing some underlying support against the stronger dollar.  Gold has been putting up a fight against the stronger dollar with XAUEUR trading at a four-month high. Also worth some attention is the potential impact on US bond yields during and following a bumper $73 billion auction of 3-, 10- and 30-year bonds. 

COT 07 May 2018

Adverse weather conditions from South and North America to Europe continue to raise the risk of a potential troubled growing season. With this mind, funds have returned to grains and the soybeans complex and are currently holding a combined net-long in the three major crops of 335,000 lots, a seasonal four-year high.  

Focus this week: With grain prices having climbed to the highest since last August, World Agricultural Supply and Demand Estimates, due Thursday, may offer clues to how solid the foundation currently is. The US Department of Agriculture’s first outlook for the next season is expected to show a price supportive decline in global inventories for corn and wheat. 

COT 07 May 2018

Non-stop buying of cocoa extended into a 15th week while the net-long at 57k still remains below the 2013 record of 84k lots. Aggressive short covering supported Arabica Coffee for a second week as the short-term technical outlook continued to improve.

COT 07 May 2018

Disclaimer

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice or a personal recommendation and does not take into consideration your objectives, financial situation and needs. Saxo Capital Markets UK Limited will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information. We assume no liability for errors, inaccuracies or omissions contained within these materials.

It is important that you understand that with investments, your capital is at risk. We offer leveraged products which carry risk and can result in losses that exceed deposits. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more here.

Additional Key Information Documents are available in our trading platform.

Saxo Capital Markets UK is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871

Please read our full disclaimer - https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer