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COT: Crude oil and gold supported by short covering

Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, October 4. A week where bad news turned out to be good news for markets after weak U.S. data led to premature speculations that the Fed might back off a bit from its aggressive stance. Developments that helped send the dollar and bond yields sharply lower while commodities received a boost from short covering in metals and energy.

Saxo Bank publishes 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.
This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, October 4. A week where bad news turned out to be good news for markets after weak U.S. manufacturing data led to premature speculations that the Federal Reserve might back off a bit from its hawkish stance. Combined with aggressive bond buying from the Bank of England and a dovish surprise from the Australia’s central bank these developments helped send the dollar and bond yields sharply lower while the S&P 500 had its best two-day surge since April 2020. 


The Bloomberg Commodity Index jumped almost 5% with the weaker dollar triggering a major round of short covering across precious and industrial metals while crude oil and fuel prouducts surged higher ahead of Wednesday’s controversial decision by OPEC+ to cut production by 2 million barrels per day. Responding to these developments short sellers across energy and metals got squeezed out of recently established positions, thereby supporting a strong bounce which at this point may hold in energy but potentially not in metals until the market gets a clearer view on when the US Federal Reserve reaches peak hawkishness.

Biggest changes on the week were buying of crude oil, gold, silver, copper and cocoa while net selling was seen across grains and livestock.



Money managers responded to surging crude oil prices on heightened speculation about a 2 million barrels per day cut in OPEC+ production by lifting the net long position in WTI and Brent crude oil by 47k lots to 375k lots, a ten week high. The change was driven by 32k lots of fresh longs and a 15k lots reduction in the gross short. Wednesday’s controversial decision by the group of producers to cut baseline production by 2 million barrels per day from November will likely translate into an actual reduction of around 1 million barrels per day with several producers led by Nigeria, Kazakhstan and not least Russia currently producing well their baselines and as a result will not have to cut. The decision nevertheless helped drive Brent up by 15% on the week as the decision will increase the tightness just before Russia’s production look set to fall further as the EU embargo starts on December 5.

All three fuel contracts jumped by more than crude oil, led by gas oil’s 14% rally driven by low stocks and concerns about winter tightness, and as a result money managers were forced to cut recession-focused short positions. In total, 12k lots of short positions were closed while the gross long received a 6k lots boost.


Short sellers across the metal sector suffered a major setback after sharp drops in the dollar and yields helped drive prices sharply higher, not least silver and platinum which ended the reporting week higher by 15% and 11% respectively. Gold jumped almost 6% with a combination of strong support at $1615, the 50% retracement of the 2018 to 2022 rally together with the mentioned dollar drop triggering a 24% reduction in the gross short and 21% increase in the gross long. Overall the position changed by 46k lots from the biggest net short in almost four years to a small net long of 5k lots.

This was a classical short covering bounce but with the outlook for the dollar and yields still being dictated by signals from the US Federal Reserve, the risk of a fresh setback remains, but potentially shallower with short sellers being less inclined to aggressively short the metal after last week's drubbing.

The silver net long jumped by 189% to 15.2k lots and highest since June, thereby continuing the price recovery from September’s two-year low at $17.40. Copper, which has provided a great deal of price inspiration to silver this year, rallied by more than 6% and the move helped trigger a 77% reduction in the net short to just 2.5k lots, the lowest conviction that prices will fall in four months.


The grains sector was mixed with selling of soybeans and soybean meal more than offsetting continued demand for corn and wheat. The soybean net long slumped by 18% to 77.5k lots and was the lowest since December following the release of the USDA’s quarterly stocks report, which showed higher-than-expected old-crop soybeans. Corn and wheat received a boost from lower-than-expected stocks with Ukraine supply concerns adding an additional layer of support to wheat.

Softs were mixed with a 25% reduction in the cocoa short being offset by selling of sugar, coffee and not least cotton, the latter seeing continued price weakness on growth concerns drive down the net long to near a 26-month low 



In forex, flows were mixed during a week that ended with a sharp downward move in US bond yields and the dollar after weak U.S. manufacturing data led to premature speculations that the Federal Reserve might back off a bit from its aggressive stance. A hope that got a reality check on Friday when another strong jobs report supported the need for further Fed action to curb growth and with that inflation.

Speculators as mentioned showed a mixed response to the dollar weakness seen during the reporting week. Overall, the gross dollar long against nine IMM currency futures and the Dollar index saw a 6% reduction to $13.9 billion with buying continued buying of euro and short covering in AUD being only partly offset by selling of GBP, CAD and BRL.

The 4% rally in the euro back to but not above parity helped support a fifth week of net buying driving the net long to a four-month high at 44k lots or €5.5 billion equivalent. Despite the continued weakness the belief among naked short sellers have faded in recent weeks resulting in a 39% drop in the gross short to near a 15-month low. Sterling’s 7% bounce from its near death experience the previous week only helped attract liquidation of both long and short positions, resulting in a small amount of net selling lifting the net short by 7% to 50k lots or £3 billion equivalent.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • 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


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