FXEMPIRE
All

COT: Speculators Cut Exposure in Pro-Cyclical Commodities

The COT report covering the week to December 3 found speculators selling pro-cyclical and trade war impacted commodities. This after Trump blurted a trade deal could be delayed until after the November US Presidential election. Hardest hit were crude oil, natural gas, copper and soybeans while gold, corn, sugar and wheat were bought
Ole Hansen
Container Cargo freight ship with working crane bridge in shipyard.

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.

Hedge funds were aggressive sellers of pro-cyclical and trade war impacted commodities during the week to December 3. This after Trump blurted a trade deal could be delayed until after the November US Presidential election. Hardest hit were crude oil, natural gas, copper and soybeans while gold, corn, sugar and wheat were bought. Overall the combined net long across the 24 major commodity futures tracked in this dropped by 153k lots to 555k lots.

Heavy selling hit the energy sector as crude oil gyrated in a wide range ahead of Friday’s OPEC+ meeting. A meeting which controlled by the Saudis ended up being a major exercise in trying to support crude oil and with that a $2 trillion Aramco valuation. This after the Saudis on top of an agreed group reduction of 500k b/d surprised the market with an additional voluntary cut of 400k b/d. While providing a floor under the market further upside now hinges on whether Iraq and others will implement the necessary cuts to comply with their new quotas.

The combined net-long in WTI and Brent was cut by 66k lots after funds added 103k lots the previous week.

Natural gas, down another 4% this Monday, has been left ill prepared for any extreme cold snap over the coming weeks. Following the worst November price action in 18 years the net-short across four Henry Hub deliverable contracts reached a seasonal record high last Tuesday of 214k lots.

Gold was bought as the market challenged resistance at $1480/oz. A level that subsequently failed to hold as the market continued to pump and dump on trade and economic data news. The net long rose by 10% to 227k, some 22% below the October record.

Long liquidation cut the silver long by 8% while copper short selling extended to a fourth consecutive week. This before breaking and closing above its 200-day moving average on Friday following the strong US job report.

During the past five weeks funds have reversed their soybeans position from a 72k lots long to a 99k lots short. This is in response to a 10% price drop during this time as demand worries lingered. Especially from China which will soon have alternative sources of supply as the South American harvest moves closer.

Surging coffee prices saw the net-long extend to a three year high at 14k lots. Tightening fundamentals have cut in half the contango which for the past few years helped make coffee one of the most attractive hedge fund short positions to hold.

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
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