Funds cut their bets on higher commodity prices by 15 percent in a week after the worst rout in two years, reducing positions in everything from copper to oil on mounting concern that global growth is slowing.
The funds held a net 1.23 million contracts across 18 U.S. commodity futures as of May 10, the lowest since July, data from the U.S. Commodity Futures Trading Commission show. The net-long position in crude oil slumped 13 percent in a week, while for copper it fell 59 percent and in silver 23 percent.
The Standard & Poor’s GSCI Index of 24 commodities fell 11 percent in the week ended May 6, the biggest drop since December 2008, as investors fretted about the end of monetary stimulus in the U.S., higher interest rates worldwide and Europe’s sovereign debt crises. At least two dozen nations and the European Central Bank raised rates this year, data compiled by Bloomberg show.
The “pressures that have been building in emerging markets in terms of inflation and rapid interest rate hikes, coupled with the end of the quantitative easing program in the U.S. plus what’s going on in Europe, we have a lot of uncertainty around the extension of aid to Greece, you put all that together, that doesn’t paint a very rosy picture,” said Francisco Blanch from Bank of America-Merrill Lynch.
“It’s not the end of the commodity bull market but it could take some of the steam off for a few months,” the bank’s global head of commodity research said in an interview with Susan Li on Bloomberg Television’s “First Up.”
Commodity Slump
The slump in commodities in the first week of May still left the S&P GSCI index where it had been in March, and the gauge rose 1.4 percent last week, taking its advance this year to 8 percent. Commodities had beaten stocks, bonds and the dollar for five consecutive months through the end of April, the longest stretch in at least 14 years, on forecasts for demand exceeding output in everything from oil to copper to corn.
The GSCI dropped 0.6 percent by 12:46 p.m. in London, led by declines of 2 percent in silver futures and 1.4 percent in New York crude oil. Copper futures fell 0.6 percent.
The net-long position in crude-oil futures traded in New York retreated to 255,713 contracts, the lowest since February, the CFTC data show. The position in copper futures declined to 6,076 contracts, the lowest since July, and in silver to 19,228 contracts, the lowest since January.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace in London at swallace6@bloomberg.net
