Financial Advisor

Bullish commodity futures bets reduced

Last week Hedge Funds and large investors reduced bullish bets for the third week in a row. Long positions in futures (excl. options) were reduced by 1.3% to 1,384,000 lots.

Worries that the current economic downturn is more than just a  soft patch seems to have changed investors' attitudes towards commodities, at least for now. A similar downshift was seen last year before the autumn rally began late August.

Losing sectors: Grains 4.7%, meats 22% and metals 1.9%
Winning sectors: energy 4% and softs 12%

The energy sector saw net gains across WTI, Gasoline and especially Heating Oil as refiners focused on making gasoline ahead of peak driving season at a time where export of diesel has been picking up resulting in a heating oil inventory decline during the second quarter.

The grain sector saw a relative big decline during a week where the price of corn and especially wheat fell heavily as improved weather has raised the prospects of a better than expected production. Total longs are still at elevated levels as funds still see a good upside potential, especially for corn and soybeans.

Long positions in the soft sector rose by 12% on the back of a big jump in sugar longs as the month long rally continued.

Investors scaled back positions in gold as the market is caught between profit takers and safe haven buyers.


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