COT: Slowing crude oil demand; Gold longs cut again
Head of Commodity Strategy
Summary: The Commitments of Traders report covering positions held and changes made by money managers in the week to June 9. Crude oil continued to be bought albeit at a much reduced pace while fuel products were sold on rising overhang of stocks. Gold and silver longs dropped further as the sector struggle to find a defense against strong appetite for risk elsewhere
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.
The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, June 9. Appetite for risk remained high that week, not least following the better-than-expected US job report on June 5. The S&P 500 rallied 4.2%, the dollar index lost 1.4% while bond yields jumped. The Bloomberg Commodity Index climbed 1.5% with gains seen across all sectors with the exception of precious metals.
A mixed week in commodities which despite broad price gains did not yield much in terms of major position changes. Crude oil continued to be bought albeit at a much reduced pace, fuel products were sold on rising overhang of stocks while natural gas held steady. Precious metals remained out of favor with the gold and silver longs dropping further while enthusiasm for copper attracted strong buying. Grains, led by corn, continued to be sold while the sugar position flipped back to long. Thereby becoming vulnerable to profit taking after the rally’s main engine, crude oil, began looking exhausted.
Energy: Buying of crude oil slowed despite another week of strong gains for both WTI and Brent crude oil. WTI saw the smallest amount of buying in this cycle with bullish bets close to a two-year high. Elevated levels of fuel products in the U.S. drove a reduction in the gasoline (RBOB) net-long to a three-year low and a rise in the distillate (ULSD) short to a three-month high.
Metals: Gold selling extended into a third week with the net long falling by 9k lots to 127k lots, a one-year low and down 55% since the February peak. Copper meanwhile and as expected attracted additional buying following the technical break above $2.50/lb, a key level of support-turned-resistance since 2017. The near five-fold jump took the net-long to 14k lots, a 15-month high.
Agriculture: Ahead of Thursday’s global supply and demand outlook report from the US Department of Agriculture, the corn short had extended to 297k lots, a 13-month high and biggest seasonal short in at least 20 years. This despite a continued steady recovery in the price. The wheat short jumped by 88% ahead of the WASDE report which pinned global stocks next year at a record high. The soybeans long meanwhile more than doubled on increased Chinese buying.
The soft sector was mixed with the oil-related rally in sugar helped flip the position back to a net long while the Arabica coffee short more than doubled in response the deteriorating technical outlook.
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.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.
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)