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Commodity Quant Strategy Summary

Core Content Overview

This document provides a detailed analysis of the current speculative positioning and inventory dynamics across various commodities, including base metals, energy, and precious metals, as monitored by BNP Paribas. It highlights key trends, market conditions, and investment recommendations based on quantitative models and historical data.

Main Commodities and Positioning Analysis

Base Metals

• Consolidated stocks of base metals have improved significantly over the past two months.
• Nickel and lead stocks remain at historically low levels, with nickel at the lowest since 2015.
• Copper is in the overbought camp, with a positioning score of 6.8 (up 0.3pp from the previous week).
• Zinc has entered the neutral level, with a score of 2.5 (unchanged from the previous week).
• Silver is at record low levels, with a positioning score of -5.9% (adjusted by open interest), indicating a net short position.
• Aluminium is near neutrality, with a score of 4.9 (up 0.3pp from the previous week).
• Silver and natural gas are the only commodities where speculators are net short.

Energy Commodities

• WTI crude oil positioning is at a record high of 23.4%, the highest since 2010.
• Brent crude oil is also overbought, with a net speculative position of 12.8%.
• Both WTI and Brent crude oil have z-scores of 1.7x and 2.7x respectively, indicating stretched positions.
• The difference between the DoE crude oil inventory and the 12-month moving average remains low, suggesting no imminent reversal.

Precious Metals

• Gold has a positioning score of 20.3%, which is 0.5pp below the previous week's value.
• The non-parametric probability of a reversal is 34.1%, placing gold slightly above neutral levels.
• Silver is the most oversold precious metal, with a positioning score of -5.9% (adjusted by open interest) and a non-parametric probability of reversal at 2.7%.

Key Investment Recommendations

• Silver: The report recommends a long XAG/XAU strategy due to its record low positioning.
• Copper: The BNP Paribas Factor Model closed a short position on copper, yielding a +4.8% profit.
• Aluminium: The BNPP-TIF model triggered a long aluminium recommendation.
• Gold: The positioning is slightly above neutral, but a reversal is still expected.
• Energy: No reversal is expected in the near term, with both WTI and Brent crude oil remaining overbought.

Data Sources and Methodology

• Data is sourced from Bloomberg LLP and BNP Paribas.
• Weekly data is used for all analyses.
• Positioning scores are calculated based on net speculative positions adjusted by open interest and normalised on a scale of 0-10.
• Z-scores are used to assess the deviation from the long-term average.
• Non-parametric probability is used to estimate the likelihood of a reversal in positions.

Important Notes

• Silver is the only precious metal currently net short.
• Copper and zinc stocks are above the 6-month average, while nickel and lead are below.
• Aluminium and copper imports have declined significantly in China, while nickel and zinc imports have recovered.
• The BNP Paribas base metal positioning score is influenced by data from LME, Comex, and Shanghai Futures Exchange.

Summary of Positioning Scores

Legal Disclaimer

• This document is a marketing communication and is not investment research for the purposes of MiFID II.
• It is intended for Professional Clients and Eligible Counterparties as defined by MiFID II.
• The information and opinions are not guaranteed for accuracy or completeness and should not be relied upon as such.
• No liability is accepted for any losses arising from the use or reliance on this document.