Crude length cut ahead of Israeli strike
London, October 28, 2024, (Oilandgaspress) –––In the latest reporting week, the Bloomberg Commodity Index rallied 1.8%, thereby fully recouping losses in the previous week. All sectors except softs saw higher prices, led by precious metals where all metals saw demand amid haven demand ahead of the US elections, with silver jumping more than 10%, after breaking resistance-now-support at USD 32.50. Elsewhere the energy sector, except natural gas, grains and livestock all recorded gains, while industrial metals were muted as the China stimulus rally deflated.
Managed money accounts, such as hedge funds and CTAs, responded to these developments by a mixed and somewhat counterintuitive reaction, not least the energy sector where traders for a second week sold into the rally. Highlighting a market where traders, correctly had started to price out the risk of a major disruption to oil flows from the Middle East. Crude oil slumped more than 4% in early Monday trading after Israel’s limited attack on Iran avoided the nation’s energy infrastructure, thereby reducing the risk of a disruption and potentially signalling a de-escalation. Prices have now retraced most of the early October China stimulus and Iran supply risk boost, weighed down by sluggish demand and the risk of rising supply of currently unwanted barrels from OPEC+ next month.
In metals, the silver net long jumped to a 31-month high at 47.4k contracts, a level which on four previous occasions since mid-2020 had triggered profit taking and long-liquidation. It is however also worth noting that the all-time high reached in April 2017 was more than double that at 99k contracts. The net long in platinum also reached a 31-month high at 25k contracts, and just like silver, a level which on several occasions since 2020 signaled a top and reversal in prices. The palladium short was cut ahead of an end of week surge triggered by Russian sanctions talk, while copper selling continued as the China stimulus impact continued to fade.
Grains traded mixed with selling of soybeans being more than offset by demand for soybean oil and corn, the behavior in the latter highlighting a great deal of uncertainty after both the gross long (+38k) and the gross short (+23k) received a boost. Finally, the softs sector, except cotton, saw selling amid improved weather outlook in key production regions sending cocoa and coffee prices lower. Livestock, an area we normally do not give that much attention, has seen five consecutive weeks of buying drive the live cattle net long to a one-year high at 90k and lean hogs
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