Energy: Crude oil’s range bound behavior together with lower US demand due to the Colonial pipeline hack driving a slump in refinery runs, as well as ongoing virus worries in Asia helped drive a 45k lots or 6.4% reduction in the combined WTI and Brent crude oil long to 656k lots, a five-week low. Despite struggling to keep up with surging metal and agriculture markets, the reductions were mostly driven by long liquidation and only a limited amount of fresh short selling, something that otherwise could signal increased risk of a reversal. Gas oil traded on the ICE exchange saw strong buying for a third week with the net long reaching 138k lots, a 31-month high.
Metals: Copper’s 5.3% surge to levels beyond the 2011 record took was met by profit taking from money managers who instead of buying into strength, as they often do, opted to reduce their net long by 8% to 61k lots. Whether this action from the some of the brightest minds signal a short-term peak in the market remains to be seen.
The combination of a weaker dollar and falling real yields – on rising inflation expectations – helped drive a 45% increase in the gold net long to 95.6k lots, a 13-week high. Having traded within an uptrend since early April, gold will be facing key resistance next week in an area between $1845 and $1855 where three major technical indicators converge.
Latest: Gold (XAUUSD) trades above its 200-day moving average to challenge trend line resistance from the August high, today around $1858. A break signaling a potential extension to $1876, the 50% retracement of the August to March correction. A slightly stronger dollar being more than offset by lower Treasury yields following Friday’s disappointing U.S. retail sales. Broad weakness across the crypto space potential playing a part as well as the “store of value” label is being challenged.
Agriculture: The grains sector reached an 8-1/2 year high before suffering a major end of week setback after the monthly WASDE report projected lower corn exports and slightly higher production of all three major crops leading to higher new crop stock piles. Just like copper, corn traders chose to sell into the 3.7% rally thereby cutting their net long by 15% to 316k lots. Overall the combined net long in the three crops dropped to the lowest since December, thereby reflecting a distinctive cooling attitude to a rally which temporarily went parabolic.