COT Report: Money Managers Turn Slightly Bullish On The Most Important Agricultural Commodities And Oil

| About: The United (USO)

Summary

The oil market liquidity decreased at a record pace over the week.

The money managers remain moderately negative on corn.

The money managers were buying wheat - this market is unlikely to continue to decline.

The soybean market recorded moderate buying on the part of the money managers, as well as increased liquidity.

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Oil

According to the latest COT report, the money managers did not sell a single WTI Crude Oil (NYMEX) contract over the week ending November 22. In total, 22,304 new contracts were bought, and 2,699 previously sold contracts were closed over the week. Generally, the money managers' net position increased by 15.3%, amounting to 188,324 lots.

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It is important to note that the open interest reduced by 12.5% over the specified period of time. This is objectively a substantial week-long decline in liquidity for this market. For the last time, a similar incident was witnessed on November 27, 2015. It should be recalled that in February 2016 WTI oil prices reached its multi-year price low at the level of $26.03 per barrel.

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The liquidity of the oil market approached the average size for the current year after the fall a week earlier. The share of the money managers' net position accounts for 7.2% of the total open interest, which corresponds to the average level. This indicates that, in general, the market expects the OPEC to take a neutral decision on November 30, which most likely will include only freezing of oil production with the exception for Libya, Nigeria and, perhaps, Iran.

Corn

Over the past week, the money managers' net short position in corn reduced by 24,762 contracts, amounting to 60,394 sold contracts. This partially made up for the aggressive corn sales, recorded a week earlier.

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The open interest fell by 3% over the week, reaching 1,757,622 lots, which corresponds to the average level of the market liquidity over the past two years.

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The Corn Volatility Index currently stands at 17.5 p., which corresponds to the minimum value over the past six months and reflects the minimum expectations of this market's volatility in the near future. The current money managers' position adds some negative connotation to this market, but overall, in my opinion, the sideways trend so far remains.

Wheat

For the week ending November 22, the money managers bought 8,617 new wheat contracts and closed 9,514 previously sold wheat contracts. As a result, the net short position fell by 13.7%, amounting to 114,222 sold contracts, which is still close to record level.

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The open interest dropped by only 1.2% over the week, amounting to 627,850 lots. The wheat market liquidity remains at the level close to the multi-year record.

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Over the last two months, the desire of the money managers to increase the size of a short position is clearly not observed. Interestingly enough, the market liquidity increased by 10% over the same period of time, reflecting the new capital inflow to the market. In my opinion, this indicates a weak potential for further substantial reduction of the wheat price.

Soybeans

Over the last week, the money managers' net long position in soybeans (CBOT) increased by 15,467 contracts, which was accompanied by the rise in its price. At that, the money managers bought 19,273 new soybean contracts and additionally sold 3,806 contracts.

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The open interest of the soybean market grew by 8.4% over the week, which means a fairly rapid inflow of the new liquidity. However, the total number of open interest amounted to 797,175 lots, which is still below the average for this market.

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The soybean market is clearly in a positive mood. But, in my opinion, neither the current position of the money managers nor the liquidity dynamics allows to expect the soybean market to grow above the level of $10.70.

Conclusion

So, in my opinion, the current money managers' position in the oil market is in line with the OPEC's decision, according to which the cartel production levels will be frozen, but not shortened.

As for the corn market, the money managers' expectations are moderately negative.

The money managers are hardly predisposed to further sales of wheat. The liquidity remains high on this market, which also does not comply with the specifications of the negative market.

The money managers started to purchases soybean again, however, neither the size of their net position nor the overall market liquidity allow to expect a significant price movement in this market.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.