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COT: Speculators pull out of metals and agriculture, retain energy positions

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, August 8. A week that saw global stocks drop by 2% with equities in the US trading lower ahead of last week’s CPI report amid worries about the financial system and the economy after Moody’s downgraded 10 local banks. Developments that saw the US yield curve steepen and the dollar trading firmer. Broad selling hit the commodity sector on disappointing Chinese trade figures.

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's 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

Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.

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Commodity weekly: Tight supply adds fuel to crude rally 

This summary highlights futures positions and changes made by hedge funds across commodities and forex in the week to last Tuesday, August 8. A week that saw global stocks drop by 2% with equities in the US trading lower ahead of last week’s CPI report amid worries about the financial system and the economy after Moody’s downgraded 10 local banks. Developments that saw the US yield curve steepen and the dollar trading firmer. Broad selling hit the commodity sector on disappointing Chinese trade figures. 

Commodity sector: 

The Bloomberg Commodity index traded lower during the reporting week as the broad June to July rally began to fade with the energy sector being the only still advancing. All the other sectors saw sharp declines, led by industrial metals on China growth concerns and precious metals in response to a stronger dollar and US Treasury yields. Elsewhere the agricultural sector saw heavy and broad selling with the grains sector loosing 2.1% and the softs sector 2.6%. 

Responding to these developments the overall net long held by hedge funds was cut by 13% and on an individual basis 19 out of the 24 major commodity futures tracked in this report saw net selling led by gold, silver, copper, soybeans, corn and sugar while demand was concentrated in natural gas and the two diesel contracts.

Crude oil and fuel products: Crude oil was flat with WTI buying being offset by Brent selling leaving the total unchanged at 421k contracts. Diesel buying continued with ULSD and Gas Oil length reaching fresh mullti-month highs
Gold, silver and copper: Gold length was cut by 24% to 75.5k contracts, and lowest since early March. Silver, platinum and copper all saw their positions flip back to a net short
Grains: Led by soybeans and corn, the sector saw broad selling as the BCOM Grains index dropped 2%. Wheat selling continued despite Black Sea concerns as the KCB RHW contract dropped 4.4% on an improved outlook
Softs & Livestock: A 2.6% drop in the BCOM Softs index was driven by broad weakness led by sugar (-19k to 149k) and cocoa (-10k to 68k), the coffee short extended 18% to -14k while cotton length was cut 12% to 32k ahead of Fridays WASDE-related surge to a January high
In forex, continued dollar strength during the reporting week helped drive a second week of short covering. The non-commercial dollar short was cut by 18% to $15.5 billion, with selling of EUR, CAD and JPY only partly offset by demand for CHF and AUD
Forex continued: The overall negative dollar view continues to be expressed only versus the EUR, GBP and MXN while greenback longs are held primarily against JPY and AUD


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