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CFTC Looking at Position Limits Aimed at Curbing Commodity Speculation

The commission voted 4-1 to propose position limits across 28 commodities, effectively placing a cap on investors' positions. If implemented, the move would at first limit positions in the spot or front contracts to a quarter of deliverable supply. Following this, the caps would be extended across all contract months, limiting positions to 10% of total market size for the first 25,000 ...
CFTC Looking at Position Limits Aimed at Curbing Commodity Speculation

Commodity markets are set to end the week on the back foot today, in line with broader market consolidation despite some strong gains in the euro yesterday after hawkish comments from ECB President Jean Claude Trichet.

Seeing some focus in the US commodity market today is news that the Commodity Futures Trading Commission (CFTC) looks set to implement sweeping plans aimed at curbing speculation in a number of key commodities including oil, gold and wheat. This comes on the back of recent appreciation in agricultural prices and fears that this could impact inflation, and cause serious civil unrest and food crises.

The commission voted 4-1 to propose position limits across 28 commodities, effectively placing a cap on investors' positions. If implemented, the move would at first only limit positions in the spot or front contracts to a quarter of deliverable supply. Following this, the caps would be extended across all contract months, limiting positions to 10% of total market size for the first 25,000 contracts, and 2.5% of total market thereafter.

Going back to the markets, there is little in the way of fundamental movers for benchmark prices today, with most commodity complexes weaker, but suffering from rather lacklustre trade.

The front Brent crude contract, which expires today, is managing to hold above the $98/bbl level, while the roll to the March 11 contract is expected to bring a $1/bbl gap-down if current prices remain. In the US market, meanwhile, WTI Nymex crude is currently trading around the $90/bbl level, losing around $1 today.

Precious metals are continuing to lose ground today; notably, despite decent gains in the euro yesterday, spot gold shed almost 3% denominated in the single currency, down to €1,030/oz. Much of this move came as confidence returned, albeit tentatively, surrounding Eurozone peripheral debt following the week's Portuguese and Spanish auctions, which despite not coming in amazingly well, didn't do all that badly either.

The base metals complex has been following the broader markets today, although traders noted some strong selling in Asia overnight as yesterday's weaker than expected US initial jobless claims number triggered a wave of pessimism surrounding potential growth for commodities. This pressure followed through to London trading this morning, with further pressure seen coming from the large increase in stockpiles at the London Metal Exchange (LME) this week. Most notably, aluminium, which saw stocks at the LME climb almost 4% this week alone, was up to 162,550 tonnes.

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