COT: Oil and gold longs cut with ags still in demand

Ole Hansen

Head of Commodity Strategy

Summary:  COT on commodities in week to October 15 showed continued demand for agriculture futures with trade talks and weather in focus. Biggest casualties were oil, natural gas, gold, silver and coffee.


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.

In the week to October 15 hedge funds continued to cover short positions across the agriculture sector in response to U.S. - China trade talk hopes and emerging weather concerns in North and South America. Both energy and metals, led by oil, natural gas and gold were sold and this left the combined net-long across 24 major commodity futures higher by 30% to 270k lots.

Major changes on a relative basis were selling of coffee together with buying of soybeans and cotton. 

Crude oil continued to be sold with the combined net-long in WTI and Brent falling by 11.5k lots to 290k lots, a nine-months low. The outlook for crude oil, not least WTI has weakened due to the seasonal rise in crude stocks and plunge in refinery activity. The recent spike in the cost of transporting crude oil due to U.S. sanctions against China’s COSCO (now easing) also helped temporarily cutting U.S. exports. Overall, we maintain the view that the weak global growth outlook is likely to keep crude oil range-bound around $55/b on WTI and $60/b on Brent.  
 

Funds cut bullish gold and silver bets by 12% to 220k and 42k lots respectively, both a three-months low. Range bound gold trading since early August around $1500/oz has sapped interest at a time where stocks have recovered and bond yields have reversed higher. With these developments in mind gold has done very well in avoiding a bigger correction, potentially supported by emerging dollar weakness.

Silver remains stuck mid range between $17/oz and $18/oz while copper also stuck witnessed some light short covering. 

Speculators were strong buyers of grain and oil seeds futures. This in response to the potential for a narrow U.S. – China trade deal driving a pickup in Chinese demand. Weather worries also supported the sector with the current slow U.S. harvest progress leaving crops in the ground exposed to the approaching cold season. 

Soybeans saw the biggest amount of buying with the net-long rising to 49k lots, a 16-months high. Corn was next with 25k lots of buying cutting the net short to 66k lots, the least bearish in eight weeks. 

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.
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)

Saxo Capital Markets (Australia) Pty Ltd.
Level 25, 2 Park Street
NSW 2000
Sydney
Australia

Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Pty Ltd ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Combined Financial Services Guide & Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as CFDs and Margin FX products may result in your losses surpassing your initial deposits. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.