Big hedge funds and speculators cut their bullish bets on commodity markets by $17 billion in the week through Tuesday, the biggest bear turn since at least 2009, regulatory data showed on Friday. The so-called "managed money" funds cut their overall net long holdings in 22 US futures markets by over 222,000 contracts or 13 percent in the five days ended May 10, according to Reuters calculations based on the Commodity Futures Trading Commission's weekly Commitment of Traders.
The data, based on both futures and options positions, confirm that some big hedge funds, commodity trading advisors (CTAs) and other major speculators dramatically pared back long positions during a week in which prices abruptly collapsed before staging a modest rebound. But it also shows that in some markets, such as oil, the story was more complicated.
The one-week cut in holdings was the largest since 2010, when available data begins. Total fund length still stood at its highest since mid-March at 1.5 million contracts. "I would view this as a bearish situation. We have a confirmed flow of selling with substantial remaining net long positions that can fuel an ongoing flow of that selling," said Tim Evans, energy analyst at Citi Futures Perspective.
The value of total fund holdings fell to $116.8 billion, less than a third of the total amount of investor capital estimated to be allocated to commodity markets worldwide. Some of that money is in over-the-counter contracts or invested via banks, which are part of a different CFTC group. Although it is an imperfect gauge, the CFTC data offers the best clues yet as to how traders positioned during the most volatile week in two years.
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