COT: Commodity traders wrong-footed by market moves

Ole Hansen

Head of Commodity Strategy

To download your copy of the Commitment of Traders: Forex report for the week ending August 21, click here

Leveraged funds continued to sell energy and metals during the week to August 21. Grain traders were net-buyers as they continued to struggle to find the direction amid mixed signals. Soft commodities led by the Brazilian real-dependent commodities of sugar and coffee continued to be sold. 

As it turned out it was also a week where funds got wrong-footed by the market. Oil, gold, coffee and sugar were all sold into a rising market while soybeans and corn were bought into a falling market. 

Enlarge
Crude oil was sold for third week with the combined Brent and WTI net-long falling by 31,000 to 664,000 lots, an 11-month low. The change was driven by long liquidation in Brent (-16,000) and fresh short selling in WTI (+15,000). This just before a weaker dollar, a bullish US stock report, and renewed focus on Iran supply risks helped send the price higher by more than 4%. 
Enlarge

The gold net-short hit a fresh record after the first signs buying was more than offset by additional short-selling. The net-short at 79,000 lots was more than three times the size of the previous record from December 2015. The silver short jumped by 26% but stayed well below the previous record. 

Enlarge

HG copper was bought for a second week. This came despite seeing the price drop to a 14-month low before recovering on Asian LME stock draws and a weaker dollar. The limited amount, however, still highlights a market that remains concerned about the impact of trade war.

Enlarge
Grains were mixed with ill-timed buying of soybeans and corn more than offsetting a 9% reduction in the CBOT wheat position, which had reached a six-year high the previous week. The annual Pro Farmer US crop tour last week pointed towards another bumper crop of corn and soybeans at a time where farmers are struggling to empty their bins of old crop supplies, not least due to the ongoing trade war with China that has cut exports of soybeans to its biggest overseas buyer.  
Enlarge
In softs, a 12-year low in Arabica coffee and a 10-year low in sugar attracted additional selling. A 10% slump in the Brazilian real this month helped drive sugar below 10 cts/lb and coffee below $1/lb. In coffee, the net-short hit a fresh record of 104,000 lots, or 1.8 million tons, the equivalent of 31% of the 2017 total global production, according to ICO.
Enlarge

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)