COT: Commodities experience week of widespread selling, with Diesel, Copper, and Corn among hardest hit COT: Commodities experience week of widespread selling, with Diesel, Copper, and Corn among hardest hit COT: Commodities experience week of widespread selling, with Diesel, Copper, and Corn among hardest hit

COT: Commodities experience week of widespread selling, with Diesel, Copper, and Corn among hardest hit

Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, April 25. A mixed week across markets that saw stock market weakness ahead of strong earnings from big tech, a weaker dollar driving ans a fresh slump in Treasury bond yields as investors sought the safety of US government debt as well as broad weakness across commodities led by industrial metals, energy and grains.


Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

What is the Commitments of Traders report?


The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • 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

 

Global Market Quick Take Europe
Saxo Market Call Daily Podcast


This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to last Tuesday, April 25. A mixed week across markets with stock market weakness seen ahead of strong earnings from big tech, a tad stronger dollar and a fresh slump in Treasury bond yields as investors sought the safety of US government debt amid a fresh collapse in First Republic Bank stock. 

Commodity sector:

The Bloomberg Commodity Index slumped 3.8% during the reporting week to April 25 with losses seen across all sectors led by industrial metals (-6.2%), grains (-6%) and energy (-4.4%). The broad price weakness drove a 21% reduction in the managed money net long to 1.05 million lots representing a notional value of $91 billion. Selling was concentrated in energy (-103k lots) and grains (-149k lots) with copper and cotton also seeing sizable net selling. 

Crude oil and diesel: The April 2 OPEC+ production cut continued to reverberate across the crude oil market. Last week through the negative impact of short sellers chasing the gaps and longs that was bought after April 3 being reduced. The combined net long in WTI and Brent crude oil was cut by 54.3k lots to 400k, a four-week low, with reduction being driven by 32.5k lots of long liquidation and 21.8k lots of fresh shorts.

A major driver of the recent crude oil market weakness has been a slump in refinery margins across the major refinery hubs in Asia, the US as well as Europe. Especially the diesel market saw accelerated selling during the reporting week, resulting in the ICE gasoil net flipping to a small net short for only the third time in seven years. Stateside meanwhile, the net long in the ULSD contract (Ultra-Light Sulphur Diesel), previously known as heating oil, was cut by 44% to a 27-month low. 

Gold, silver, and platinum: Selling of gold extended to a third week, albeit at an even slower pace than the previous two. During the correction phase, the net long has been cut by 11.8k lots to 133k lots, a small counter reaction to the 126k lots that was bought in the previous four weeks. The platinum net long jumped one-third to 24.4k lots, a thirteen-month high, in response to the recent outperformance versus gold while the silver buyers increased their net long by 16% to 25k, highest since January 17 but still a muted response considering the recent strong rally. 

HG Copper: The copper weakness below $4 a pound triggered 30k lots of selling, the most in a single week since August 2019, and it flipped the net to a 10.5k lot short. The VWAP (Volume-weighted Average Price) in the period between April 20 and 25 when selling accelerated was $3.95 a pound, and it highlights a level above which we could see some short seller pain emerge.

Grains: The Bloomberg Commodity Grain index reached a nine-month low last week with broad weakness sending all the major grain and soybeans contracts lower. Speculators responded to the continued weakness by cutting their net long to just 33k lots, the lowest since August 2020, and down from 819,000 last April when the Russian invasion of Ukraine triggered supply worries. Selling of 64.7k lots of corn flipped the net position to a net short while continued selling of CBOT wheat lifted the net short to a 113k lots, a fresh five-year high. 

Softs: The recent strong buying of soft commodities, led by sugar, Arabica coffee and cocoa slowed to trickle while cotton traders following four weeks of net buying responded to a 7.3% price drop by increasing the net short by 176% to 20.3k lots.

Forex

In forex, speculators were net sellers of the dollar for a fifth consecutive week, resulting in the gross short versus nine IMM futures and the Dollar Index rising to $11.4 billion, an 11-week high. The most notable flow involving selling of the greenback continued to be led by the euro which saw an increase to 169k lots or $23 billion equivalent, the highest in 30 months. In addition to GBP, which reached a 17-month high, short covering in CHF, CAD and AUD also played their part. Most notable exception was selling of JPY as speculators, correctly as it turned out, positioned themselves for a dovish Bank of Japan meeting, the first being led its new chief Kazuo Ueda.

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.