COT: Mixed week in land of commodities COT: Mixed week in land of commodities COT: Mixed week in land of commodities

COT: Mixed week in land of commodities

Ole Hansen

Head of Commodity Strategy

Summary:  This summary highlights futures positions and changes made by speculators such as hedge funds and CTA's across 24 commodities up until last Tuesday, September 29. A week where a reduction in bullish bets across the energy sector and copper off-set continued buying of corn and soybeans. Gold and silver saw only small changes during what was a relatively quiet week where both metals traded 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.

This summary highlights futures positions and changes made by speculators such as hedge funds and CTA’s across 24 major commodity futures up until last Tuesday, September 29.

A week were the S&P 500 took a tumble before ending up by 0.6%. Key drivers were a boost to banks led by HSBC, stronger economic reports from China and continued hopes that U.S. politicians would agree a new fiscal stimulus deal. Elsewhere the dollar traded close to unchanged, bond yields were a tad softer while the Bloomberg Commodity Index lost 1% with all the major sectors trading lower.

Fifteen out of the 24 commodity futures tracked in this report traded lower with two of the recent most popular sectors, grains and HG copper, the hardest hit. Crude oil, gold and silver also traded lower while platinum, RBOB gasoline, cocoa and live cattle were the major exceptions.

Hedge funds responded to these changes by reducing bullish bets across the energy sector and copper while taking the opportunity to add further length to soybeans and corn as prices softened. Gold and silver saw only small changes during what was a relatively quiet week where both metals traded lower. Overall the total net-long held steady at a 28 month high at 1.96 million lots.

The week ahead sees a potential busy week in commodities with oil traders keeping an eye on EIA’s monthly Short-Term Energy Outlook on Tuesday followed by OPEC’s World Oil Outlook on Thursday for its take on global supply and demand. Following the biggest quarterly surge in food commodities since 2016, the market will focus on twin insights from the USDA in its monthly WASDE report on Friday and before that on Thursday, United Nations data on global food prices. It is likely to show another jump after hitting a six-month high in August. Copper rallied strongly on Friday as the threat of strike action over wage talks leading to supply disruptions from Chilean mines continues to grow.

Energy: Sellers returned to crude oil as the short-covering rally only managed to last for one week before growing fears about a sustained recovery again took hold. While only seeing a modest price drop of 1.4% on the week, hedge funds cut their net-longs by 6% to 402k lots. WTI crude oil saw the biggest reduction on a combination of long liquidation and fresh short selling. The gas oil long was cut in half to just 4k lots while gasoline saw a small amount of net buying for the first time in five weeks.

Latest from our daily Market Quick Take: WTI Crude Oil (OILUSNOV20) & Brent Crude Oil (OILUKNOV20) both bounced following the biggest weekly drop since June as the market focus on an apparent improvement in the health of the US president than rising supply from Libya and concerns about a sustained recovery in consumption. The current range bound trading behaviour highlights a market that remains torn between short-term weakness against the expectations for a recovery, the timing of which, however, continues to be delayed. Key area of resistance in Brent remains the band from $42.5/b to $43.25/b while support continues to be found towards $39/b.

Energy

Metals: Gold and silver had a quiet week, both in terms of price and position changes. Speculators held a small net short in platinum for the first time in 14 months after the price recently lost 10% of its value relative to gold. In HG Copper, softening fundamentals resulted in the biggest one week reduction since February, when the Chinese lockdown sent it tumbling. The net long was cut by 12% after almost continued buying since March had seen it reach a 32-month high.

Latest: Spot Gold (XAUUSD) and Spot Silver (XAGUSD) - both showed a lackluster performance on Friday despite the threat to President Trumps health and a shaky U.S. employment report sent another warning sign, that the metals are still consolidating. Despite multiple sources of uncertainty, the (lack) of follow-through buying above $1900/oz highlights the potential need for a weaker dollar and renewed focus on the threat of inflation before the rally can continue. We maintain a positive outlook but also accept that the market is currently not receiving enough oxygen to take it higher. Support at $1882/oz with a break raising the risk of a deeper correction to the recent low at $1850/oz.

Precious and industrial metals

Agriculture: The first correction to hit soybeans and corn since early August was taken as an opportunity by funds to increase their bullish exposure even further. Healthy underlying fundamentals led by strong Chinese demand and a weather related drop in yields providing enough support a continued accumulation of longs. The soybeans net long increased by 8% to 229k lots, the highest since 2012 while the corn net-long at 107k lots was the highest in 14 months.

Key U.S. crop futures

In soft commodities, the sugar bulls added another 8% to bring the net-long to 229k lots, the highest since November 2016. Another 10% was added to the cocoa long before the market suffered and end of week correction. In coffee, the net-long was reduced by 18% to 36k lots as bulls continued to scale back exposures after once again having taken a major hit during the 20% September top to bottom slump.

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 Q3

Sandcastle economics

01 / 07

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
  • The rise of populism: Far-right parties will influence the future

    The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

    Read article
  • Investing in China: Navigating Q1 amid economic challenges

    Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

    Read article
Disclaimer

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

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 may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

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

The information or the products and services referred to on this site 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 are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

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