The energy sector led a cautious recovery in risk appetite


Energy

The energy sector saw the bulk of the activity with gains of 15% in crude oil to 30% in gas oil (diesel) lifting the long net across the sector for the first time in three weeks. Hedge funds increased their net long position in WTI and Brent crude oil by 13,000 lots, after 123,000 lots were abandoned in the previous two weeks amid rising volatility and margin calls. The 28% jump in ULSD (diesel) triggered a 23% reduction on further short selling.

From today’s market quick take:

Crude Oil (OILUKMAY22 & OILUSMAY22) is trading lower in early trading as Friday’s rebel attacks on Saudi Arabia were offset by concerns over the near-term demand outlook in China, after the biggest importer Crude global said it would lock down half of Shanghai for mass testing as virus outbreaks continue to spread. Peace talks between Russia and Ukraine resume this week, but with Putin’s government seen as toxic to many key buyers, self-sanction is likely to continue despite a potential solution.

OPEC+ meets virtually on Thursday to set targets for May, but given its inability or reluctance to discuss the elephant in the room, falling Russian production, hopes for additional barrels from producers in the CCG remain thin. Key Brent resistance at $123/bbl while a break below $112/bbl would signal further loss of momentum.

Speculators continued to adjust their positions after gold’s recent high-to-low correction of $175 and after the FOMC made the first of many rate hikes to rein in runaway inflation. The result being a 9% reduction in the length of gold and silver. HG Copper meanwhile saw its net length jump of 25% but at just 36.5k lots, it remains around 45% below the one-year high.

From today’s market quick take:

Gold (XAUUSD) is trading lower as the global bond rout continues to gather momentum, with the 10-year US Treasury yield rising above 2.5% in Asia, while crude oil trades higher. down as virus outbreaks in China worsen and Ukraine appears ready to discuss a deal (see below). Having failed to breach resistance at $1962 last week, the market is once again trading defensively focusing on ETF flows, the main source of underlying demand over the past month. A break below $1922 increases the risk of a return to key support in the $1900 area.

Copper (COPPERUSMAY22) trades lower for a third day as traders worry about the short-term impact of demand as China, the world’s largest consumer, continues to battle virus outbreaks. In addition, Jiangxi Copper Co., China’s top metal producer, warned on Friday that metal prices could fall this year along with other commodities as countries roll back stimulus and high prices dampen demand. , while logistical bottlenecks ease.

Cereals

The grains sector also saw mixed action, with length being added to soybeans and corn while wheat saw a slight net reduction. Overall, however, net buying in the six major futures markets hit a ten-year high and the third highest on record.

Soft raw materials

A strong cross-sector gain of 5.5% drew only net buying to cotton and sugar, with coffee rebounding from a four-month low lacking conviction as longs were reduced as the price rose .

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