Multi-Asset Essentials: Commodities
Energy lifts commodities, but DI negative as USD presents a headwind:
We’ve seen significant divergence in commodity price performance in recent weeks. Positive returns at an asset class level have been driven by energy. More broadly, the stronger USD is a headwind, leaving our 3m Diffusion Indicator negative.
Sentiment and positioning suggest near-term downside risk to oil:
From a fundamental perspective, oil could remain supported in Q4. But sentiment looks stretched and specs’ net longs are now highest for almost 2y, suggesting near-term risk skewed to downside. Diesel net longs extended on tight market.
Grains prices lower as market prices out supply risk; ignores El Niño:
Grains are close to stretched pessimism according to our Sentiment Barometer Indicator, as good harvests have seen markets price out supply risk. This leaves them vulnerable to adverse developments. We see scope for a reversal in agricultural vs energy commodities.
