Speculators hold positions at 11-month high amid rally

‘Bad Block’

While U.S. economic data has improved, the world is still “a risky place” as Europe’s fiscal and banking crisis worsens, said Vincent Reinhart, the chief U.S. economist at Morgan Stanley. “We’re the best house on a bad block,” he said in a Bloomberg Television interview Aug. 15. The bank cut its outlook for this year’s global growth to 3.2 percent from 3.5 percent on Aug. 16, and to 3.5 percent from 3.8 percent for 2013.

The 17-nation euro-area’s economy contracted 0.2 percent in the second quarter as a worsening debt crisis and budget cuts drove at least six countries into recession, the European Union’s statistics office in Luxembourg said Aug. 14.

European Demand

“World economies are a driver of demand and European demand in general is down,” said Steve Kahler, the chief operating officer at Teucrium Trading LLC, who helps oversee $140 million of assets. “Anytime you have a macro-economic situation like you have in Europe, it’s going to impact their overall demand.”

Investors pulled $53.1 million from commodity funds in the week ended Aug. 15, the first outflow in three weeks, according to data from Cambridge, Massachusetts-based EPFR Global, which tracks money flows.

“There’s definitely been an August slowdown,” said Brad Durham, a managing director for EPFR. “That’s why these numbers are not particularly decisive in either direction.”

Investors cut their bullish oil bets by 7.2 percent to 152,222 contracts, the biggest drop since May 8, the CFTC data show. Prices jumped 3.4 percent last week, the third consecutive gain, as improving U.S. economic data boosted the outlook for demand amid rising political tension in the Middle East.

Oil Production

The region was responsible for 33 percent of global oil production last year and held 79 percent of proved reserves, according to data from London-based BP Plc.

Bullish platinum wagers dropped 17 percent, the most since May 22, to 7,096 contracts, the CFTC data show. Prices rallied 5.2 percent last week, the most since January, on concern that clashes between police and striking miners will spread in South Africa, the biggest producer of the metal. Police killed 34 striking workers at Lonmin Plc’s Marikana mine on Aug. 16.

A measure of 11 U.S. farm goods showed speculators increased bullish bets in agricultural commodities by 0.6 percent to 851,875 contracts, the ninth gain in 10 weeks.

Money managers raised corn holdings for a 10th consecutive week, by 6 percent to 303,178 contracts. That’s the longest stretch of gains since at least June 2006, when the data starts.

Corn surged 60 percent since June 15, reaching a record $8.49 a bushel in Chicago on Aug. 10, as the drought parched millions of acres of U.S. cropland and pasture.

“Even modest demand growth in the current tepid environment will be sufficient to tighten markets,” Jeffrey Currie, the head of commodities research at Goldman Sachs Group Inc. in New York, said in an interview Aug. 14. “We see commodity prices rising.”

Bloomberg News

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