Cotton hits eight-week high on caution over oil supplies, prices

Cotton futures in New York rose to their highest level in eight weeks as traders weigh the prospect of tight supplies this year and volatility in oil markets. The most active futures contract rose as much as 1.7% to 65.76 cents per pound, the highest intraday price since Nov. 11.

Uncertainty over oil prices following the overthrow of Venezuelan leader Nicolás Maduro could affect cotton markets, according to independent consultant Pery Pedro. Oil is often considered an indicator of the costs of synthetic fibers, which can replace cotton in textile production.

This adds to the potential for tighter supply this year from major producers in Brazil and the United States, as the market expects a reduction in planted area given the price environment seen in recent months, according to Raphael Bulascoschi, market intelligence analyst at StoneX. Investors who have been holding large short positions in cotton could also be trimming their bearish bets, he said.

“Overall, it looks like a good start to the year for commodities, and with the market holding a very short position in cotton, short covering appears to be the most likely driver of the rally so far,” he said.