Hedge funds and large investors continued to reduce their long exposure
to commodity futures and options last week. The data compiled 3
October showed a 4.2 percent reduction to 920,000 lots, the lowest
level since July 2010.
This also helps to explain the strength of the rally that followed as funds scrambled to rebuild positions. The rally that began Wednesday was the biggest three-day rally of the year and was helped by increased efforts in Europe to deal with the debt crisis and signs that the U.S. economy may avoid recession.
The energy sector saw an increase in net longs of 20 percent primarily helped by a sharp reduction in the Natural Gas short position. The WTI crude position meanwhile continued to be scaled back, moving below 200,000 lots just ahead of the rally which began last Wednesday when U.S. inventories showed a much bigger draw than expected.
Exposure to the grains sector was cut by 2 percent to 242,000 lots, the lowest level since July 2010 and much below the 2011 peak of 890,000 lots back in February. The “World agriculture supply and demand estimates” report will be released this Wednesday and any signs of tightening could attract new buying given the sharp reduction of long positions over the last month.
The metal sector was flat on the week with a small increase in gold longs - the first in four weeks - being off-set by another increase in short copper positions.
The soft sector also saw a reduction in speculative longs as positions in sugar and coffee were reduced while the cocoa short position increased further.
This also helps to explain the strength of the rally that followed as funds scrambled to rebuild positions. The rally that began Wednesday was the biggest three-day rally of the year and was helped by increased efforts in Europe to deal with the debt crisis and signs that the U.S. economy may avoid recession.
The energy sector saw an increase in net longs of 20 percent primarily helped by a sharp reduction in the Natural Gas short position. The WTI crude position meanwhile continued to be scaled back, moving below 200,000 lots just ahead of the rally which began last Wednesday when U.S. inventories showed a much bigger draw than expected.
Exposure to the grains sector was cut by 2 percent to 242,000 lots, the lowest level since July 2010 and much below the 2011 peak of 890,000 lots back in February. The “World agriculture supply and demand estimates” report will be released this Wednesday and any signs of tightening could attract new buying given the sharp reduction of long positions over the last month.
The metal sector was flat on the week with a small increase in gold longs - the first in four weeks - being off-set by another increase in short copper positions.
The soft sector also saw a reduction in speculative longs as positions in sugar and coffee were reduced while the cocoa short position increased further.
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 holding
are typically institutional investors such as hedge funds and CTAs.
Analysts and investors follow changes in these positions because such
transactions can reflect an expectation of a change in prices.
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