Head of Commodity Strategy
Summary: This summary highlights futures and options positions and changes made by speculators such as hedge funds and CTA's across 24 commodities up until last Tuesday, October 13. A week were the Bloomberg Commodity Index rose 1.6% with all sectors apart from precious metals trading higher. The increase in net length was concentrated in Brent crude oil, natural gas, copper, corn and sugar while WTI crude oil, gold soybeans and cocoa saw the bulk of the selling.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
This summary highlights futures positions and changes made by speculators such as hedge funds and CTA’s across 24 commodities up until last Tuesday, October 13. A week where a furious rally in big tech helped lift U.S. stocks to the highest in almost six weeks. Also in focus was the ebb and flow of news regarding a fresh round of U.S. stimulus. The S&P 500 rose 4.5%, bond yields held steady, the dollar traded softer while broad buying lifted the Bloomberg Commodity index by 1.6%.
All sectors with the exception of precious metals rose with the top five being natural gas, HG Copper, cotton, coffee and hogs. The worst performers were gasoline, palladium, and cocoa. Overall hedged funds increased their net long position by 5% to a fresh 30 month high at 2.1 million lots. The buying was concentrated in Brent crude oil, natural gas, copper, corn and sugar while WTI crude oil, gold, soybeans and cocoa saw the bulk of the selling. From a net short in mid-July, the agriculture sector long now accounts for 50% of the total commodity fund long.
Energy: The sector saw a mixed week with selling of WTI (-9k) on long liquidation being more than offset by a 45% or 37.5k lots jump in the Brent long, primarily due to short-covering. Overall with the price of both contracts stuck in a relative tight range, the combined long at 414k lots was within the range seen for the past six weeks. The biggest change was in natural gas where a 13% rally, driven by production shut-ins during Hurricane Delta, helped drive a 5% increase in the combine net-long in four Henry Hub deliverable futures and swap contracts to 342k lots, the highest since May 2017.
Metals: Gold’s current struggle to find fresh momentum to break away from $1900/oz, saw funds reduce their net-long by 9% to just 120k lots. A level of bullish bets this low was last seen in June 2019 just before gold began its near 50% ascent. Last week’s change was driven by a 21% jump in naked short positions to 53k lots, again the highest since mid-2019. Silver saw another small reduction in the net long while platinum maintained a small net short.
Funds returned to copper following what turned out to be a shallow 9% correction in early October. The net-long jumped by 15% to 80.5k lots, not far from the late September peak at 87.3k lots which was the highest since early 2018.
Agriculture: In grains the combined net long across six soy, corn and wheat contracts reached 627k lots, the highest since April 2014. The change was driven by a 27% jump in the corn long to 171k lots after the USDA in its latest WASDE report cut its production outlook. Wheat was bought as severe dryness in Russia’s winter wheat belt and in the US Southern Plains threatened the prospect.
In softs, the sugar long surged higher to reach a four-year high at 242k lots. Raw sugar prices reached a seven month high after the temporary hurricane threat in the US and dry weather in Brazil spurred supply concerns. The hurricane threat to cotton fields in the U.S., the world’s top exporter, helped drive the price to a seven-month high and the speculative net long to a two-year high.
The managed money position across 13 agriculture commodities rose above 1 million lots to the highest level since May 2014. The top three longs were sugar with a share of 23%, soybeans (21%) and #corn (16%).
AI: The good, the bad, and the bubble
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Steen Jakobsen,
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The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
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As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
