Energy: Speculators made the biggest reduction in six months to their exposure in six oil and fuel contracts. The 60k lots reduction to 835k lots was however mostly driven by a 51.5k lots reduction in the Brent crude oil net-long to a four-month low. Overall the combined net long in WTI and Brent dropped by 46k lots to an 11-week low at 659k lots.
Latest on crude oil: Crude oil (OILUSMAY21 & OILUKJUN21) experienced a volatile Easter period with the OPEC+ decision to ease production curbs initially sending prices higher, as it sent a signal of optimism, before turning lower on worries about increased supplies from Iran, who currently ship 1 million barrels/day of sanctioned oil to China and another wave of corona virus cases. Exempted from supply restrictions due to sanctions Iran can produce at will as long it can find buyers willing to take the risk. Iran and U.S. will take part in indirect talks today in Vienna on the Iranian nuclear agreement. For now, Brent crude oil remains locked in a wide $60 to $65 range. Focus today the monthly “Short-term energy outlook” from the EIA and its projections for US production and global demand.
Metals: It was a relatively quiet week in metals with continued price weakness driving a relative small reductions in gold, silver and copper. The latter saw its net-length drop to an eight month low as the price continued to consolidate but without triggering a major correction.
Latest on gold and copper:
Spot Gold (XAUUSD) - remains rangebound but following another firm rejection below $1680 last week, the market is pondering whether the double bottom has sowed the foundation for a recovery. After losing 10% during the first quarter to come bottom of the performance table, the technical level it needs to break as a minimum remains at $1765. For now, however, most of the recovery has been a result of a weaker dollar and yields that have stopped rising. Stronger than expected inflation remains gold and with that also silver’s best chance of a recovery.
Copper surged higher in thin holiday trading on Monday in response to Chiles announcement on Friday it would shut it borders throughout April in order to battle a deadly surge in coronavirus cases. Together with its next-door neighbor Peru it supplies around 40% of global output and while Chile said production is safe (hence the softer tone today) the risk of a supply disruption from mine closures combined with the prospect for strong demand is likely to keep prices supported. Having cut bullish bets by 50% during the past six weeks, a break above $4.2/lb may be the trigger that forces funds back on the buying side.
Agriculture: Grains which all traded lower on profit taking ahead of the March 31 Prospective Planting report from the US Department of Agriculture resulted in mixed reactions from speculators. While soybeans and wheat both saw long liquidation, the corn long reached a ten-year high at 396k lots. Overall the net long across six soy and grains contract saw the biggest one week reduction since last May and at 684k lots, corn now accounts for a whopping 58% of that net length.