WTI Crude Oil (NYMEX and ICE combined)
According to the latest COT report, in the week ending February 21, money managers continued to buy oil, increasing their long position to the new historic highs. Over the week, their net-long in WTI Oil (NYMEX and ICE combined) rose by 21,777 (5.16%) contracts, reaching a new record 443,703 lots.
Liquidity declined relatively unexpectedly. Over the week, total open interest in oil on NYMEX and ICE exchanges declined by 6.62%. However, this outflow cannot be called critical.
As a result of purchases by money managers, as well as the decreased liquidity, the relative size of money managers' net position (the ratio between the net position and the open interest) jumped to 12.7%. This already corresponds to 2014 levels, when the WTI oil price was above $100.
It is worth noting that since the end of November 2016, the relative size of the money managers' net position in oil has doubled, although the price only demonstrates the sideways trend.
It is also interesting to note that at the moment, the oil futures market is in a state of backwardation.
The growth of the money managers' long position is linked to the expectations that OPEC will extend its program to reduce the production to the second half of the year. But there is still a long way to go, and the position of the money managers already looks rather overheated, which may provoke partial sales and market correction after any negative prediction.
The money managers continue to gradually increase their long position in gold, but there is still a very long way to the levels of August 2016. Over the week the money managers closed 7,466 previously sold and bought 7,016 new gold contracts. As a result their net-long in gold rose by 14,482 (21,3%) contracts to 82,464 lots.
Open interest grew by 3.8% over the week while staying below the average over the past two years.
The money managers are maintaining a neutral-positive position in gold, while the liquidity dynamics still remains weak. I believe that, at the moment, it indicates the low probability that gold prices will further rise to the levels seen at the 2016 highs.
In the week ending February 21, the money managers were buying silver for the eighth consecutive week with no slowdown. During the period their net-long in silver increased by 4,729 (6,7%) contracts amounting to 75,475 lots.
The open interest of the silver market rose by 6.36% over the week. For this market, this is relatively fast growth rate of liquidity. Given the inflow of the new liquidity to the market, the relative size of the money managers' position is 33.1%. This figure is still inferior to the levels of 2016, and, therefore, it is too early to argue that the position of the money managers is overheated.
In my opinion, the silver market is maintaining positive momentum, and, just like in past reviews, I forecast the price at the $19 level.
Over the last week, the money managers did not buy a single new corn contract, while closing previously sold contracts. As a result their net-long rose by 8% to 92,216 lots.
Over the week, the open interest grew by 2.9% and already quite considerably exceeds the two-year average rate.
Additionally, the growth of the money managers' net-long position and the overall market liquidity took place amid declining corn futures prices. In my opinion, this characterizes the current price reduction in this market as a correction.
Similarly to the corn market, in the last week money managers were mostly closing previously sold wheat contracts, and this also took place amid the declining futures prices. Over the week the money managers' net-short position in wheat decreased by 12,662 lots reaching 27,385 sold contracts. Their position is now one step away from becoming positive.
The market liquidity has decreased, but remains significantly above the two-year average.
In my opinion, the wheat market now demonstrates correction amid the formation of upgoing wave. The reduction of the U.S. wheat planted area to the historic minimum creates additional support for the market.
On the last week, the money managers were selling soybeans amid the decreasing market prices. Their net-long decreased by 9,6% to 154,307 lots, which is still close to the two-year maximum.
The market liquidity remained almost unchanged at the average level over the past year and a half.
The soybean market is still characterized by the relatively large net long position of money managers, prone to further reduction, as well as weak market liquidity. Therefore, I still doubt the ability of this market to stay at the current price level over the medium term.
PUTTING IT ALL TOGETHER
The continuing growth of money managers' long position in oil amid the lateral price movement increases market sensitivity to any negative factor. This could lead to correction.
The current gold price is almost back to March 2016 levels. The size of both money managers' net position and the open interest, then, are below the last year's levels. I believe this indicates that the potential of the gold market to grow up to the last year's maximum is currently very weak.
The money managers continue to buy silver amid the liquidity growth. This market remains positive.
The reduction of both wheat and corn prices in the last week was accompanied by closure of the previously sold contracts by the money managers. At least this indicates strong support for the market.
Money managers' position in soybeans still looks overbought amid the lack of new liquidity inflow to 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.