Exit Commodities specifications on Omicron and Fed Worries


Energy

The energy sector was hardest hit, where renewed demand concerns pushed WTI and Brent prices down by more than 15%. In response, hedge funds stepped up their pace of futures selling with the combined net collapse of 90,000 lots to a one-year low at 425,000 lots. The slowdown after the peak in late October led to an eight-week exodus of oil contracts, peaking last week, and during that time net length saw a reduction of 35% or 224,000 lots. Potentially prepare the market for a strong speculative rally once the technical and fundamental outlook becomes more favorable.

Latest: Crude Oil (OILUKFEB22 & OILUSJAN21) is trading higher after its longest period of weekly declines since 2018. Today’s rise, in addition to an overall positive risk sentiment in Asia, was supported by Saudi Arabia’s move to raise prices official sales (OSP) in Asia and the United States next month. Thus signaling that demand for confidence will be strong enough to absorb the increase in OPEC + output from last week as mobility is challenged by the omicron virus. For now, WTI and Brent continue to find resistance at their 200 day moving averages, currently at $ 69.50 and $ 72.88 respectively.

Gold was sold net for a second week as speculators continued to reduce exposure after the failed attempt to break above $ 1,830. With Fed Chairman Powell signaling a shift in focus from job creation to fighting inflation, sentiment took another hit, leading to a reduction of 13.7,000 lots to a low of four weeks at 105,000 lots. Industrial metals also suffered as the net purchase of HG copper fell by a third to a three-month low of 13.4,000 lots. Copper’s trading behavior since July has undermined hedge fund involvement with the current net length, a far cry from the 92k record set around this time last year.

Latest: Gold (XAUUSD) received a small offer on Friday following mixed US data, but overall it still lacks the momentum to challenge a resistance area just above $ 1,790 where the 50 and 200 day moving averages meet. Focus on Friday’s US CPI data as the gold market struggles to respond to rising inflation as this could accelerate rate hike expectations, putting pressure on the market. rise in real returns which are inversely correlated to the performance of gold. A full 25 basis point rate hike is now slated for July and near-term direction will likely be determined by the ebb and flow of future rate hike expectations.

Agriculture

The entire industry, with the exception of livestock, has been hit hard, just a week after funds raised the most bullish bets on grains and soft drinks in 15 months. Both sectors have suffered declines of more than 5%, with recent successes such as wheat and cotton being hit hard. As mentioned, sales were broad and dominated by corn, soybeans, sugar and cocoa, the latter along with palladium being the only two contracts where speculators hold a short position.

This week, the grain market will focus on changing weather conditions in Australia and its potential impact on the wheat harvest, as well as the USDA’s monthly World Agriculture Supply & Demand (WASDE) report.

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