COT: Strong buying of WTI; Subdued gold interest

Ole Hansen

Head of Commodity Strategy

Summary:  The Commitments of Traders report covering positions held and changes made by money managers in the week to May 19 found that speculators maintained strong buying interest in energy and metals at the expense of the agriculture sector. Top three buys were WTI crude oil, natural gas and gold while selling was topped by corn, soybeans and wheat.


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.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, May 19. A week were the questionable Moderna vaccine promise and reduced lockdowns spurred continued demand for riskier assets. US stocks resumed their rally with the S&P 500 rising by 2.3% while bond yields traded softer and Dollar index lost 0.6%.

The Bloomberg Commodity Index jumped 2.7% to reach a one month high with all the major energy and metal futures posting strong gains. However, while the energy and metal sectors had a strong week the net-long across the 24 major commodity futures tracked in this was close to unchanged due continued selling of most agriculture commodities.

Energy: Another strong rally in crude oil saw the combine net long in WTI and Brent rise by 26k lots to 507k lots, a 16-week high. Seven consecutive weeks of buying has resulted in bullish WTI bets rising almost three-fold to 348k, a 20-month high, while Brent buyers have only added 102k lots to 158k. While not yet overly stretched, the amount of buying has left the market exposed should the technical and/or fundamental outlook turn less friendly. Buying interest in Brent has been much more muted.

Following a four-week rally WTI crude oil has temporarily been boxed in between resistance at $35.20/bbl, the April high and support at $30.75/bbl, the uptrend from the lows. How the market handle these two levels will give us a clue about the current strength of sentiment in the market.

Buyers returned to natural gas following the recent slump. The 6.4% price jump attracted 24k lots of fresh longs resulting in the net long rising to 136k lots.

Metals: Silver’s 14% surge helped drive a 54% increase in the net-long to 21k lots, the highest since March 17. Gold investors meanwhile continued to flock to bullion-backed ETFs while funds only added 12.3k lots to their futures net-long. Despite hitting a fresh multi-year high on escalating tensions between US and China, and the potential for further stimulus, the net-long at 173k lots remained close to an 11-month low.

Copper traders was the least bearish since January as the price popped higher to reach a two-month high on China housing data and virus hopes. The net-short was cut by 26% to 9.7k lots.

Agriculture: Broad selling of food commodities continued with just four out of 13 futures contracts being bought. All the three major crops were sold, not least corn which saw a 15% increase in the net-short to 245k lots, a one-year high. One of the few exceptions was sugar as the continued rally in crude oil potentially could divert sugar canes back toward ethanol production instead of the sweetener.

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.
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