Speculative futures positions scaled back to August levels

The impact of the turmoil in commodities over the last couple of weeks was highlighted in the weekly Commitment of Traders report from the Commodity Futures Trading Commission. Hedge Funds and large investors scaled back futures positions across U.S. commodities by 11% last Tuesday to 1.359 million lots. This is the lowest level since August 2010 and has removed all the length that was added during the QE2 induced run up in prices.

 The unwinding of the popular short dollar long commodity strategy also made an impact on the speculative short dollar position which was reduced by 18% as of last Tuesday. This is a relatively small reduction and could trigger further dollar appreciations should the uncertainty persist.

Energy: The WTI crude position has now been reduced by 20% from the April peak to 243k lots. This is only a relatively small reduction given the scale of the setback in price and could indicate that the selling has been met by fresh buying from traders who find sub 100 dollar on WTI an attractive level. The market is therefore still exposed to additional long liquidation should the correction continue.

Metals: Copper was the biggest casualty last week as worries about a Chinese slowdown continues to cause adjustments to established long positions. The position has now been reduced by 2/3 from the April peak. Silver, which has borne the brunt of the recent correction, has seen speculators scaling back positions to February 2010 levels while gold is holding up much better, having only seen an 18% reduction since the recent peak.

Agriculture:  Despite uncertainties about the ongoing planting season the sector has not been immune to cutbacks as positions were cut by 8 percent as of last Tuesday. The biggest casualties were corn and soybeans while the wheat position was nearly unchanged amid dry weather conditions which are hampering both winter crops and delaying summer planting.

Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holdings are typically institutional investors such as hedge funds and CTAs. The above chart tracks a total of 27 different commodities split into sectors.