COMMODITIES 6 minutes to read

COT: Funds cut bullish commodity bets to 30-month low ahead of G20

Ole Hansen

Head of Commodity Strategy

Summary:  Hedge funds continued to cut bullish commodity bets ahead of the G20 summit and the net-long across 26 major commodities hit its lowest since March 2016 in the week to November 27.


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.

To download your copy of the Commitment of Traders: Commodities report for the week ending November 27, click here.

Ahead of this weekend’s G20 summit, which yielded two supportive meetings, hedge funds continued to cut bullish commodity bets. In the week to November 27 the net-long across 26 major commodities reached 562k lots, the lowest since March 2016. 

However the 90-day ceasefire between the US and China has given growth dependent commodities such as industrial metals (HG Copper +2%) a boost overnight while the stronger Chinese renminbi has provided support to gold. The biggest move, however, has been crude oil, which received a psychological boost from Russia and Saudi Arabia agreeing to continue managing production into 2019. This was an important signal to send ahead of Thursday’s Opec meeting in Vienna, a meeting where a production cut of more than 1 million barrels is now expected to be announced. 

Returning to the action ahead of the meeting as shown in the weekly Commitments of Traders report from the US Commodity Futures Trading Commission, we find in the table below that only cotton and a few livestock contracts managed to finish the reporting week higher. Biggest net-selling was seen in Brent crude oil, NY ULSD, soybean complex, corn and sugar.

Funds cut both bullish and not least bearish WTI crude oil bets which left the net higher for the first time in 12 weeks. Brent meanwhile saw continued long liquidation and fresh shorts being added. Overall the combined net-long dropped to 339k lots a near three-year low and a level from where buyers have returned in the past. The 5% spike this Monday in response to news from the Putin-MBS meeting and Alberta’s premier ordering a mandatory 325k b/d production cut now needs to be backed up by action from Opec later this week. 

If successful, Brent crude oil could still manage a return to $70/b before year end. 
 
Gold was sold but overall the price and the net-short have both remained range-bound during the past couple of months. Silver’s net-short stayed close to unchanged with long and short positions both seeing a reduction. So far this Monday we have seen a strong start to December trading for silver (+1.6%) due to the boost from other industrial metals. Gold (+1%) meanwhile has been supported by a weaker dollar, not least against the Chinese renminbi, but still remain range-bound with resistance at $1240/oz yet to be challenged.

"China has agreed to start purchasing agricultural product from our farmers immediately." This statement from the White House following Saturday’s talk with China has helped send soybeans above $9/bu this Monday. The 1.9% jump however is a relatively small reaction not least considering that the sector led by the soybeans complex was by far the most shorted in the week to November 27. 

Record US stockpiles of soybeans need to be shifted soon in order to have any meaningful price impact. Especially considering how favourable weather in Brazil continues to point to a potential record Brazilian soy crop, due to be harvested in a couple of months.
Sugar returned to neutral after four weeks of selling while the cotton net-long slumped to a 15-month low. 
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