COT: Oil at three-year high triggers continued fund selling

Ole Hansen

Head of Commodity Strategy
Ole Hansen joined Saxo Bank in 2008 and has been Head of Commodity Strategy since 2010. He focuses on delivering strategies and analyses of the global commodity markets defined by fundamentals, market sentiment and technical developments.

Download your copy of the latest Commitment of Traders: Commodities report here.

Hedge funds cut bullish commodities bets for a third week as the stronger dollar created headwinds for metals while surging crude oil prices continued to attract profit-taking. Staying with energy, demand for oil products continued to rise while natural gas was cut by one-quarter. 

Grains were mixed with soybeans selling being more than offset by strong pre-WASDE buying of corn and wheat. 

While crude oil rallied hard on the back of President Trump's decision to leave the 2015 nuclear agreement, hedge funds took to opportunity to reduce bullish bets for a third consecutive week. During this time the combined net-long (using four oil contracts on CME and ICE) has dropped by 88,000 lots to 1 million, an eight-week low.  

Demand for products, however, continued with the net-longs in gas oil, gasoline, and diesel all rising.

Gold and silver put up a fight against the stronger dollar with both managing to hold onto key support at $1,300/oz and $16/oz. respectively. Despite a small amount of net-buying in gold, the gross-long nevertheless dropped to just 118,000 lots, a 26-month low. 

On that basis funds have now been left unprepared for a potential move higher with the technical focus on $1,326/oz, the 38.2% retracement of the April to May sell-off. 

Three weeks of copper buying came to a halt as the stronger dollar and US-China trade impasse weigh on both sentiment and prices. 

China trade jitters resulting in less demand for US soybeans, meanwhile, helped trigger the largest weekly sell-off since December. Funds flipped their position in wheat back to a net-long but it is unlikely to have survived the week. This after selling pressure mounted following Thursday’s WASDE report which showed a surprise rise in US wheat production despite the poor condition of winter wheat. 

In soft commodities the elevated short positions in both sugar and coffee continued to be reduced while cocoa buyers paused following 15 consecutive weeks of buying.

You can access both of our platforms from a single Saxo account.

Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)