EnergyCrude oil’s 7% rally during the reporting week was supported by a strong pickup in demand from hedge funds. The result being a combined 81k contract jump in the Brent (55k) and WTI (26k) net longs to 395k contacts, a nine-week high and biggest weekly jump since April 2020 when buyers had started to return following the global lockdown slump. However, with most of the increase being driven by short covering (45k) as opposed to fresh longs (36k) traders have yet to fully embrace the prospect of even higher prices, potentially attracting more buying in the short term as traders continue to add length. Strong gains across the gasoline and distillate contracts primarily triggered a reaction in gasoil which saw its net long rise 21% to 70.3k contracts.
Gold’s continued rally, this reporting week by 1.8%, helped attract continued demand and short covering from hedge funds. A seventh consecutive week of buying saw the net long rise by 11k contracts to 93.3k contracts, a nine-month high. Silver, which despite support from a weaker dollar and rising industrial metal prices only saw 3.4 contracts being added, bringing the net long to 28k contracts.
Copper, one of the best performing commodities this month, attracted another 6.5k contracts of buying, lifting the net long to a nine-month high at 35.2 contract. The last two weeks have seen the strongest accumulation of length by funds since October 2021 and while China provides the fundamental reason for buying, the positive price action has also fed a great deal of speculative momentum buying. The PGM’s meanwhile saw net selling as prices of both platinum and palladium fell. The net long in platinum slumped by 31% to 16.9k contacts as the discount to gold raced higher to reach 865 dollars, compared with 750 at the start of the year.
The impact of the January 10 World Agriculture Supply and Demand Estimate report (WASDE), which showed support for corn and soybeans, helped lift the BCOM Grains Index by 4.1% during the week to January 17. With gains primarily being driven by soybeans and corn, those longs received a strong boost; soybeans by 28% to 168k contracts and corn by 28% to 192k.
In a week where prices of the Chicago and Kansas wheat contracts rose by 2.8% and 5.4% respectively, funds continued to sell into those gains. Chicago wheat together with Arabica coffee together with US natural gasare now the two most shorted commodities. Representing a nominal value of around $2.4 billion, the wheat short at 65k was the most elevated since May 2019 while in coffee the 40.5k contract – a 34% jump on the week – was the highest since November 2019.
Another soft commodity that increasingly has fallen out of favor among funds is cotton, which during the reporting week saw a 2.3% price drop drive 11k lots of net selling, resulting in the net flipping to a net short of 2k lots for the first time since May 2020.