Copper and Silver See Strong Speculative Demand, COT: Ole Hansen, Saxo

Buying was contracted in HG Copper where an 8.7% surge helped drive a 52% increase in the net long while silver’s 6.1% rally helped support a tripling of the net long to 14.6k lots. Apart from a 15% reduction in the notorious volatile natural gas contract, the reaction across the energy sector was mixed with gas oil and gasoline in demand while the combined crude oil net long was reduced for a second week as WTI buying continued to be offset by selling of Brent. During this time the WTI long has increased by 31k lots while the Brent long has been cut by 56k lots.

In agriculture heavy selling of soybeans continued with the net long falling to 18k lots, a level that was last seen 16 months ago just before China started hoovering up supplies. Overall, the net long in corn, soybeans and wheat dropped to 220k lots, a 61% reduction since the April record peak. Heavy selling in sugar and cocoa also helped drive a sharp reduction in bullish bets while a 4% correction in coffee only cut the net long by 1%.

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Crude oil (OILUKDEC21 & OILUSDEC21) continued higher in Asia with Brent crude now trading within striking distance of the 2018 high at $86.75 with WTI trading at a fresh seven-year high. The market remains bid with OPEC+ sticking to its cautious production increase approach siting the threat to demand still posed by the pandemic.Thereby ignoring the unfolding energy crisis which according to estimates could see gas-to-oil switching add up to one million barrels ofadditional oil demand this winter. Focus this week on dwindling US stock levels and China which is facing renewed Covid-19 outbreaks after infections spread to 11 provinces. 

Gold (XAUUSD) and silver’s (XAGUSD) recent strong run of gains received a temporary setback on Friday in response to a sudden boutoftaper tantrum following comments by Fed chair Powell. At the same time, however he talked down the risk of raising interest rates while also expressing concern over persistently elevated inflation. Focus on dollar which continues to lose momentum and bond yields where the recent yield rise has primarily been driven by a reprising of inflation, thereby keeping real yields deep in negative territory. Resistance at $1814 followed by the big one at $1835. 

Grain prices trading higher led by wheat which rallied strongly last week, amid increasing demand for all types of wheat and stockpiles potentially heading for a five-year low at the end of the 2021-22 season. Adding to this surging fertilizer and fuel prices rising costs for farmers and a three-month U.S. weather forecast calling for drought in key growing areas such as Kansas. The benchmark futures contract for soft winter wheat (WHEATDEC21) has returned to $7.63 ahead of $7.86, the eight-year high reached in August. 

Source: https://www.home.saxo/en-gb/content/articles/commodities/cot-copper-and-silver-see-strong-speculative-demand-25102021