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COT: Funds showing little faith in crude oil rally
Ole Hansen
Head of Commodity Strategy
Summary: Fresh data from the ICE Futures Europe Exchange reveals that hedge funds lacked confidence in last week's surging oil market.
During the shutdown of the US federal government, the Commitments of Traders report will not be published. No report has been issued by the CFTC since the week of December 18. The ICE Futures Europe Exchange, however, continues as normal with Brent crude and gas oil shown below.
In the week to January 8 Brent crude oil rallied by 9% as Opec production cuts and renewed risk-on in stocks due to dovish comments from Fed Chair Jerome Powell all helped improved the battered sentiment. However, looking at the weekly change in speculative positions, we find that hedge funds lacked trust in the surging oil market. During the week they only added 5,821 lots to bring the total to 158,146 lots.
Drilling deeper into the data we find that short-covering has been the main driver with the gross-long at 257,022 lots being almost unchanged since Dec 4.
Drilling deeper into the data we find that short-covering has been the main driver with the gross-long at 257,022 lots being almost unchanged since Dec 4.
However, since Tuesday’s cutoff Brent crude oil broke above $57.50/b, the November low. This move helped trigger a jump in open interest of 41,000 lots, an increase which most likely has been driven by fresh buying from technical and momentum traders.
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 Eastern time 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.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 Eastern time 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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