Energy: Speculators cut bullish crude oil bets by 22% to 344k lots, a 26-month low with WTI and Brent both seeing heavy net selling, not only from long liquidation but also fresh short selling. A sign that traders have started to adopt a more balanced view on the market following the tight market led surge earlier in the year. While sanctions and under investments are likely to prolong the current energy crisis, the risk of a recession driving down demand has changed the focus. In addition, China’s zero Covid tolerance has further postponed an expected economic revival from the world’s largest consumer of commodities and biggest importer of crude oil. Signs of slowing demand for fuel products, not least in the US, also helped drive long liquidation across the three major product futures of gas oil, diesel and gasoline.
Metals: Demand for gold, both from hedge funds via futures and investors via Exchange-traded funds suffered another reduction during the reporting week, driven by a combination of falling commodity prices reducing forward inflation expectations, loss of momentum attracting fresh short selling, the stronger dollar and not least the recent drop in silver prices in response to the price slump hitting the industrial metal sector. Overall speculators cut bullish gold bets by 43% to 27k lots, a three-year low, primarily driven by fresh short selling. Silver meanwhile had the bears in the driving seat as the net short position reached a three-year high at 8k lots. Despite a 10% price drop the selling appetite in copper was relatively muted with the net short position holding steady at 26k lots, lowest since March 2020 when the pandemic pulled the rug underneath the market.
Agriculture: A near 12% slump in the Bloomberg Grains index helped drive another week of long liquidation across the sector. From a combined net long above 800k lots in early April heavy long liquidation has since driven the total down by 52% to an eight-month low at 391k lots. Corn suffered the biggest amount of selling followed by soybeans and wheat, the latter seeing a return to a small net short as the price returned to levels seen before the Ukraine war. In softs, the sugar long was cut to a two-year low at 43k lots, down 82% from the April peak, the cocoa short extended to a three-year high while continued cotton long liquidation cut the net to a one-year low. Coffee managed to go against the trend with a small price uptick supporting a small amount of net buying.