COT: Funds slash bullish commodity bets
Head of Commodity Strategy, Saxo Bank Group
Summary: The latest US Commitment of Traders report showed a major decline in funds' total commodities position.
To download your copy of the Commitment of Traders: Commodities report for the week ending March 5, click here.
Hedge funds cut bullish commodity bets by almost one quarter last week. The total net-long slumped to a three-year low at just 494k lots. Looking at the table below we find the agriculture sector, led by grains, being out of favour with traders and investors holding net-short positions in 12 out of 14 futures contracts. At the opposite end the energy sector, led by crude oil, remains the most favoured followed by metals.
Since hitting a through at 243k lots on January 8 – a three-year low – funds have only bought back 200k lots despite having seen the price of both Brent and WTI recover close to half the October to December sell-off. Thishighlights that macroeconomic driven investors worry about the impact of slowing global growth despite the Opec+ group’s best efforts to support the price through cutting production.
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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