Crude length cut to eight-month low; dollar buying resumes
In the latest COT report by the US CFTC and ICE Exchange Europe, covering the week to March 15, we focus on futures positions and changes made by hedge funds across commodities, forex and financial futures markets. It was a week where risk appetite staged a small comeback despite a continued flow of troubling news from Ukraine, US Treasuries yields surged ahead of the FOMC meeting, while in commodities, the Bloomberg Spot Index gave back the bulk of the 11% gain from the previous week with selling seen across most sectors.
This summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, March 15. A week where risk appetite stage a small comeback with stock markets rising despite a continued flow of troubling news from Ukraine, and US Treasuries staging a sharp reversal with yields on the 10-year notes surging 30 basis point as the market priced in an imminent but long-awaited US rate hike. In commodities, the Bloomberg Spot Index gave back the bulk of the 11% gain from the previous week with selling seen across most sectors.
Commodities
The Bloomberg Commodity Spot index slumped by 8.3%, thereby giving back most of the gains seen during the first week of the Russian invasion. Russia-focused commodities like crude oil, palladium and wheat took the biggest hit in percentage terms. Overall, the total net long held by managed money accounts across 24 major commodity futures was reduced by 5% to an eight-week low at 2.06 million lots, the biggest reductions seen in crude oil, natural gas, gold, silver, copper and coffee.
Energy: Another week of extreme volatility in crude oil, this time a 22% move to the downside, drove a second weekly reduction in the combine WTI and Brent net long by 23k lots to a four-month low at 411k lots and just above the 400k lots reached in early December when crude oil briefly traded below $70/b in response to the Omicron virus variant. Brent, the global benchmark, saw its net long drop to a 16-month low at 153k lots.
As mentioned, when volatility spikes and traders are faced with rising margin calls on their open futures positions, the first reaction is to make an across-the-board reduction. This is currently very noticeable in the five oil and fuel contracts which have seen open interest fall from 7.1 million lots on March 12 to a current seven-year low at 4.7 million lots.
Monday AM market comment: Crude oil (OILUKMAY22 & OILUSAPR22) rose to a one-week high in Asia as the war in Ukraine keeps global supplies very tight with traders, mostly through self-sanctioning, avoiding Russian crude, currently being offered close to 30-dollar below Brent with a limited number of buyers queuing up to secure cheap cargoes. In addition, Middle East tensions also rose after Houthi rebels attacked sites across Saudi Arabia over the weekend. With supply tightening, the market will be looking for signs of demand destruction, mostly through the cost of diesel and gasoline as well as the impact of temporary covid related lockdowns in China.
Information Source: Read More By Saxo Bank’s Ole Hansen:
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