COT: Commodity specs cut longs to 40-month low

Hedge funds cut bullish commodity bets to a 40-month low in the week to May 7. The 41% reduction to just 219k lots was broad-based with all sectors being sold in response to renewed trade war and demand concerns.
Ole Hansen
U.S. EIA Report

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

To download your copy of the Commitment of Traders: Commodity report for the week ending May 7, click here.

The biggest casualties were WTI crude oil, HG copper, soybeans, sugar, cotton and live cattle. Only six out of 24 commodities were bought with gas oil, corn and gold attracting most of the attention.

Note: See page 3 in the attached report for detailed descriptions of the different data points in the below report

Crude oil positioning continued to diverge with accelerated selling of WTI (-29k lots) being partly offset by the continued buying of Brent (+2k). The behaviour of Brent especially raising questions about the strength of the current price weakness.

1) The steepness of the Brent forward curve points to an increasingly tight physical market caused by multiple voluntary and involuntary supply disruptions.

2) During the last two reporting weeks, Brent sank 5.4% while the net-long increased by 10k lots. Last week most of the increase in the net-long was due to short-covering not long liquidation, another sign of limited selling appetite despite lower flat (spot) prices.

Gold was bought for a second week but the limited amount of short-covering highlights the yellow metal’s current struggle to gain momentum. All other metals were sold, not least HG copper where the net-short jumped by 173% to 27k lots, a 14-week high.

The combined grain short saw a small reduction with planting delays supporting short covering in corn while trade war concerns and demand worries hit soybeans. The week went from bad to worse when the USDA in their monthly WASDE report on Friday forecast bigger-than-expected U.S. supplies of all three major crops (table). Soybeans dropped to lowest since 2008 while July corn hit a contract low.

COT on grains:

In soft commodities, the sugar net-short almost doubled while cotton returned to a net short following a week where the trade war raised demand concerns and the price sank to an 18-month low.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials, the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

Start trading now

This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US