The Commodities Feed: Specs boost positioning in oil

Energy – Specs boost net long in oil

ICE Brent settled a little more than 1% lower yesterday amid reduced trading volumes due to a number of countries still off for Easter. However, the market has made a partial recovery in early morning trading today. Plenty of uncertainty is hanging over the market, and recently announced OPEC+ supply cuts have only added to this. Supply cuts can always be interpreted in two ways. First, and the most obvious, is that supply cuts are bullish given they will lead to reduced supply, and second, supply cuts are a bearish signal, as they possibly signal demand concerns. Prior to the announced cuts, the market was already expected to be tight over the second half of the year, but additional supply reductions could signal that OPEC+ is of the view that demand could underperform relative to expectations.

However, the latest positioning data suggest that speculators hold a more constructive view following the recently-announced supply cuts. The latest data show that the managed money net long in ICE Brent increased by 73,354 lots over the last reporting week to 234,461 lots as of last Tuesday. This was driven predominantly by fresh longs, with the gross long increasing by 44,236 lots. There was also a fair amount of short covering following the surprise cuts, with the gross short decreasing by 29,118 lots. Unsurprisingly, the managed money net long in NYMEX WTI also saw a large increase, growing by 63,138 lots over the week to 176,414 lots. However, this move was predominantly driven by short covering, with the gross short falling by 44,736 lots.

Read next: Tight US jobs market favours 25bp Fed rate hike| FXMAG.COM

Bloomberg reports that the Russian Energy Ministry has said that oil output in March fell by 700Mbbls/d, which if true would be more than the 500Mbbls/d planned reduction the government previously announced. However, this reduction does not appear to align with exports, as seaborne crude oil flows remain strong.   

For this week, there are a number of key releases. Later today the EIA will release its short-term energy outlook, which will include US oil production forecasts. Then later in the week, OPEC will release its monthly oil market report on Thursday, followed by the IEA’s monthly oil report on Friday. The market will be keen to see what demand revisions are made, if any, and if so how this changes the outlook, particularly in light of the recent supply cuts announced by some OPEC+ members.

Agriculture – US winter wheat conditions weaken

The United States Department of Agriculture's (USDA's) latest weekly crop progress report shows that the winter wheat crop condition slightly deteriorated over the last week and remains well below year-ago levels. The USDA rated 27% of the winter wheat crop in good-to-excellent condition as of 9 April compared to 28% a week ago and 32% at this point in the season last year. For corn, the USDA reported that 3% of the crop is planted, marginally higher than the 2% reported last week and a year ago as well.

Recent data from Thailand’s Office of the Cane and Sugar Board show that Thailand crushed 93.88mt (+2% year-on-year) of sugarcane in 2022/23, lower than the initial estimates for more than 100mt of cane. This has resulted in sugar output of around 11mt. Lower-than-expected output from Thailand, combined with lower Indian supply, continues to support sugar prices, which have recently broken above USc23/lb. Key for the market in the coming months is how the CS Brazil crop develops. CS Brazil is expected to produce its second-largest amount of sugar on record this season. However, there are concerns about whether Brazil will be able to export all of this supply with increased competition for logistics following record domestic soybean and corn crops.