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COT Report: Speculators sold crude ahead of OPEC hike
Commodities
Ole Hansen
Head of Commodity Strategy
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Key points:
Our weekly commitment of traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week ending Tuesday, 27 May 2025.
A relatively quiet holiday-shortened week saw a small increase in the non-commercial US dollar short, primarily driven by demand for EUR and GBP.
Overall, the COT reporting week saw the Bloomberg Commodity Index trade near unchanged, with losses in energy and agriculture being offset by gains across precious and industrial metals.
Hedge funds responded with net selling of crude oil and softs, while demand across metals focused primarily on platinum and silver.
Latest developments: Geopolitical and tariff tensions sparked a strong weekly start for commodities led by energy and metals
Forex:
The latest reporting week to 27 May offered little in terms of fresh market direction, during a week that saw the S&P 500 suffer a small loss, while the bond yields traded softer by a couple of basis points. However, these relatively calm market conditions did not prevent fresh US dollar selling, which saw the broad-focused Bloomberg Dollar Index touch a 17-month low, while the narrow-focused Dollar Index held within an established range and above the April low.
Flows across the eight IMM currency futures tracked in this were relatively muted, with buying of EUR and GBP being partly offset by small selling of the remainder, led by CHF and JPY, overall lifting the gross US dollar short by USD 1 billion to USD 13.3 billion.
Geopolitical and tariff tensions spark strong weekly start for commodities
The commodities sector has started the week with strong gains, led by energy and metals—both precious and industrial—in response to heightened geopolitical and tariff tensions. These developments follow a weekend that saw Ukraine launch a spectacular assault on several of Russia’s strategic airfields, damaging over 40 aircraft.In addition, tensions between the US and China—the world’s largest economies—are rising again, following a weekend during which both countries accused each other of violating a trade deal that was only concluded last month. Prior to these renewed hostilities we have seen a sharp increase in container freight rates, as exporters in China and importers in the US took advantage of the 90-day pause in tariff hikes to frontload shipments ahead of the mid-year peak cargo season.
The Bloomberg Commodity Index, which fell 0.6% last month, trades up 1.7% in early Monday trading, with broad gains led by copper, crude oil, and gold.
HG copper futures in New York are trading sharply higher after Trump doubled import tariffs on steel and aluminium to 50%, raising speculation that a larger-than-expected tariff could soon be applied to copper. The New York premium over London has risen back above 12%, with supply issues at the world’s second-largest mine in Congo also providing additional support—offsetting short-term, trade tension-related demand concerns.
A range-bound crude oil market saw prices recover all of last week’s losses, surging higher despite a group of eight OPEC+ producers announcing a third consecutive production hike of 0.41 million b/d. This move was made primarily to regain market share from high-cost producers and to penalise persistent cheaters—led by Iraq and, not least, Kazakhstan, which last week stated it was not technically possible to reduce production in order to comply. Instead, the focus has now shifted back to geopolitically related supply concerns, particularly involving Russia, Iran, and Libya, the latter, after its eastern government said it could take precautionary measures, including a force majeure on oil fields, after a rival militia stormed the National Oil Corp headquarters.
Gold, which suffered a small 0.6% setback last month, trades up around 2% on the day after receiving fresh safe-haven demand due to the aforementioned tensions. Together with a weaker USD, the yellow metal now trades above USD 3,330 and the downward-trending line from the April record high. In order to attract fresh momentum buying—not least from hedge funds, who recently cut their net long in the COMEX gold future to a 14-month low—a higher high above USD 3,365 is likely needed.
Key findings from the latest COT reporting week
The latest COT report covered a Memorial Day holiday shortened week to 27 May, and it potentially played its part in keeping changes across our universe of 27 major commodities futures to a minimum. Overall, a week that despite a softer dollar saw the Bloomberg Commodities Index trades near unchanged with losses in energy and agriculture being offset by gains across precious and industrial metals.
On an individual level, losses were led by crude oil ahead of another bumper OPEC8+ production hike, the third in a row, wheat amid an improved US growing outlook, and not least the softs sector where cocoa, coffee and cotton all suffered steep losses. Gains on the other hand were concentrated in platinum, copper and soybeans.
Hedge funds responded to these developments by selling of crude oil ahead of the OPEC8+ production hike, overall lowering the WTI and Brent net long to 226k, which is still within an established range. In metals, the platinum long jumped to 18.7k, a three-month high, while limited action was seen across the others, including gold. The grains sector saw the first week of net buying in six, led by soybeans, while all the softs saw net selling, led by sugar and coffee.
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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