Due to concerns of further economic slowdown, investors have doubts about the demand for commodities such as crude oil, metals, and grains. Hedge funds have reached their highest level of bearish sentiment towards commodities in 13 years.

Data from the US Commodity Futures Trading Commission (CFTC) shows that as of last Tuesday, fund managers had accumulated nearly 0.153 million net short positions in futures and options on 20 commodity markets, the highest level on record since 2011.

This move highlights a significant change in market sentiment. In 2021, the pandemic-induced supply chain disruptions and the commodity supercycle led investors to embark on a record-breaking bullish bet. However, as the global economy slows and commodity production rebounds, investor bullish sentiment has gradually weakened. Today, market volatility driven by US recession concerns has completely reversed the trend.

Mike McGlone, a senior commodity strategist at Bloomberg Intelligence, said:

"Commodity futures speculators have ample reasons to go short. Increased energy and agricultural supplies, declining demand, and a stronger dollar all constitute solid resistance to price decline...

This is a bear market."

Data shows that Bloomberg's Commodity Spot Index, which tracks energy, metals, and agricultural futures, has fallen nearly 11% since its high point in May 2024.

Earlier this week, a global financial market crash put pressure on risk assets. West Texas Intermediate crude futures fell below $73 a barrel, hitting a six-month low. The sell-off in crude oil was more pronounced than the bullish sentiment brought about by geopolitical tension in the Middle East and the positive impact of Libyan production interruption (down 0.27 million barrels per day).

Editor/Emily