US Hedge Funds Cut Bullish Commodity Bets for Sixth Straight Week

on Nov 19, 2012

**Bearish Sentiment Grows Amongst Commodities Investors**

As a result of intensifying growth concerns and a raft of negative economic data, US hedge funds have cut bullish commodities bets for a sixth straight week – the longest retreat since the depths of the global financial crisis in 2008, Bloomberg reported on 19 November 2012.
Recent Commodity Futures Trading Commission (CFTC) data has shown that in the week ended November 13, investors lowered combined net-long positions across 18 US commodity futures and options by 17 per cent to 772,512 contracts. By the same token, commodity holdings have tumbled 38 per cent since October 2 in the longest slump since August 2008.

According to the CFTC data, crude-oil bets fell 18 per cent to 100,021 contracts, the most bearish position since May. Meanwhile, bets on heating oil tumbled 12 per cent to 26,065 contracts, the lowest since September 25. A measure of 11 US farm goods showed investors reduced bullish bets in agricultural commodities by 22 per cent to 415,498 contracts, the biggest decline since November 2011. Corn holdings fell 14 per cent to their lowest since early July — 202,853 contracts. Meanwhile, speculators more than tripled their net-short bets in cotton to 19,327 contracts, the biggest shorting trend since May 2007. Money managers also turned bearish on copper for the first time since August this year. Investors are now betting on a decline in copper prices, holding a net-short position of 826 contracts, CFTC data showed. A week earlier, the funds held a net-long position of 2,077 futures and options.

In regards to the prolonged commodities retreat, Martin Murenbeeld, chief economist at Toronto-based wealth management firm DundeeWealth Inc., said: “I am not bullish on commodities. I don’t think we are going to see improvement in the world economy for some time as there are too many problems.”
**Economic Data Weighs**
!m[Mounting Economic Concerns Turn Investors Bearish in Longest Commodities Retreat Since 2008 ](/uploads/story/849/thumbs/pic1_inline.png)Signalling the problems, which have pushed commodities towards negative territory and caused investors’ bearish sentiment, recent economic data showed ongoing financial struggle in the world’s leading economies.

Separate reports showed last week that US industrial production unexpectedly declined in October, while applications for jobless benefits rose to the highest level since April 2011. Official figures also pointed at the Eurozone’s economy, which last quarter tumbled back into recession for the second time in four years.
Commodities Heading to First Annual Loss in Four Years as Supply Exceeds Demand

While the world’s leading economies are struggling, production figures show an increase. According to a report by investment bank Morgan Stanley, commodities are heading for the first annual loss in four years, as weaker growth, decreased demand and more supply mean surpluses in commodities.
So far this year, the Standard & Poor’s GSCI Spot Index of commodities has dropped 0.4 per cent.


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