COT: Renewed rotation into grains out of energy and metals

Ole Hansen

Head of Commodity Strategy

Summary:  This summary highlights futures and options positions and changes made by speculators such as hedge funds and CTA's across 24 commodities up until last Tuesday, October 27. A relatively quiet week that saw a continuation of the rotation out of energy and metals into the agriculture sector. The cut off date for this report however, occurred just before safe-haven dollar strength helped send all but a few commodities lower.


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.

NOTE: Due to technical issues there will be no attachment to this report. 

This summary highlights futures positions and changes made by speculators such as hedge funds and CTA’s across 24 commodities up until last Tuesday, October 27. 

A reporting period that signaled the beginning of a tough week for global markets caused by growing coronavirus cases leading to renewed lockdowns in Europe, U.S. stimulus efforts being postponed and jitters ahead Tuesday’s U.S. election. In the week to last Tuesday, the S&P 500 lost 1.5% before lackluster tech results triggered the worst weekly rout since March. The dollar was steady, bonds ticked higher while the Bloomberg Commodity Index lost 0.5%.

A near unchanged net-long position across 24 major commodity futures at 2.3 million, the highest since February 2017, disguised a renewed rotation out of energy and metals into agriculture. Biggest reductions were seen in WTI crude oil, natural gas and live cattle while most of the buying was concentrated in corn, soybean oil and sugar.

Given the accelerated sell-off seen across most commodity markets following the end of the reporting week last Tuesday, we are not going into much details in this update. As per the graph below, all but a few commodities traded lower after Tuesday. The grain sector was not surprisingly also hit by profit taking following a rapid buildup in long positions in recent weeks on the back of strong underlying fundamental support. It highlights the risk that we may enter an immediate future where investors are more concerned about capital preservation than capital gains.

Energy: The week saw net selling of crude oil and fuel as the fundamental outlook began to deteriorate. Traders meanwhile booked some profit into an ongoing rally. 

Latest: Brent crude oil (OILUKJAN21) and WTI crude oil (OILUSDEC20) - trade near a five-month low on renewed weakness driven by a combination of coronavirus related lockdowns hurting demand and a continued surge in Libya’s production, now at 800k barrels/day from 100k barrels/day in early September and targeting 1.3 million barrels/day by the beginning of 2021. These latest developments are likely to keep oil under pressure with the recovery in global oil demand being pushed further out into the future. Brent crude is currently targeting $35/b, the 38.2% retracement of the April to August rally.

Energy

Metals: A relatively quiet week in precious metals ahead of last Wednesday when gold and silver both broke lower as the dollar strengthened. Small profit taking was seen in gold and copper with fresh buying seen in silver and not least platinum where the position flipped back to a net long. 

Precious and industrial metals

Agriculture: In grains the combined net long in soybeans, corn and wheat extended to 558,000 lots, a fresh eight-year high.  Corn in particular was left exposed to the wave of profit taking that followed. The 4.2% drop in corn after the reporting week had ended last Tuesday, came just after speculators had increased their net long exposure by 26% to 276k lots. 

Key U.S. crop futures

Just like corn, sugar was the contract among the  soft commodities that was left exposed to the wave of profit taking that occurred after last Tuesday. Before that happened, the net long had reached a new two-year high at 263k lots. The coffee long was cut by 40% as demand for the bean continues to suffer amid the pandemic's impact on consumer behavior. 

Soft commodities
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.

Quarterly Outlook 2024 Q4

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Head of FX Strategy

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Head of FX Strategy

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992