Commodity markets turned slightly more bullish last week

Spot crude oil prices continue to be held back by demand woes, despite recent moves to tighten the market by Saudi Arabia. However, in a sign that sentiment may be starting to turn, net long positions rose last week, suggesting markets are starting to become more bullish. This is broadly in line with our expectations that prices will pick up from current levels as the oil market tightens.

What you will learn:

• Natural gas net long positions were up last week as tighter supply provides some support to prices. The US natural gas rig count dropped again in last Friday’s data release as natural gas producers react to lower LNG export demand to Europe and reductions in US domestic demand. Investors are betting these supply reductions will raise prices from their current low.
• Industrial metal prices have risen over the past week as expectations grow that China will increase stimulus to support its economy and the real estate sector. Most metal markets saw an increase in net long positions last week, but largely due to the closure of short positions. However, long copper positions also increased, flipping LME copper to an overall net long. We expected copper prices to pick up slightly from last month’s lows, but overall, forecast prices to remain subdued this year as global economic growth is lacklustre and supply is ramping up.
• After four consecutive weeks of decline, managed money gold net positioning has picked up again last week. Investors have grown less bearish on gold as prices have moved sideways while expectations of further rate hikes from the Fed have fallen. Lower rates decrease the opportunity-cost of holding non-yielding assets like gold, and total shorts have fallen 20% w/w, suggesting less market participants see gold as overvalued.