COT: Funds showing little faith in crude oil rally
Head of Commodity Strategy
Summary: Fresh data from the ICE Futures Europe Exchange reveals that hedge funds lacked confidence in last week's surging oil market.
Drilling deeper into the data we find that short-covering has been the main driver with the gross-long at 257,022 lots being almost unchanged since Dec 4.
However, since Tuesday’s cutoff Brent crude oil broke above $57.50/b, the November low. This move helped trigger a jump in open interest of 41,000 lots, an increase which most likely has been driven by fresh buying from technical and momentum traders.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 Eastern time 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.