COT: Commodities long liquidation spreads to energy COT: Commodities long liquidation spreads to energy COT: Commodities long liquidation spreads to energy

COT: Commodities long liquidation spreads to energy

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, August 15. A week that saw risk adversity continue to rise in response to China growth and financial risk concerns and signs the Federal Reserve’s fight against inflation is not yet done. Speculators meanwhile maintained an unchanged dollar short position while broad commodities selling led to reductions across all sectors, with selling concentrated in gold, copper, soybeans, corn, and coffee while crude oil was mixed with WTI selling, being partly offset by Brent buying


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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's 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

Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.

Global Market Quick Take Europe
Saxo Market Call Daily Podcast

Commodity weekly: China and FOMC woes weigh 


This summary highlights futures positions and changes made by hedge funds across commodities, forex and bonds in the week to last Tuesday, August 15. A week that saw risk adversity continue to rise in response to China growth and financial risk concerns and signs the Federal Reserve’s fight against inflation is not yet done. Global stocks lost altitude as US bond yields spiked towards fresh cycle highs while the dollar rose. Leveraged fund short selling across the US yield curve saw the long-end short position reach a record high while a near 2% drop in one of the major commodity indices was driven by broad selling across all sectors. 

Commodity sector:

The Bloomberg Commodity index traded lower for a second week as recent selling in metals and agricultural products spread to energy. Overall, it left the index down 1.8% on the week with losses being led by industrial metals (-3.3%) and grains (-3.7%) while emerging consolidation saw the energy sector down 1%. Leverage funds responded to these developments by net selling 16 out of the 24 major commodity futures tracked in this. Overall, the 166k contract reduction in the combined net long to 1.05 million was driven by a 75k contract reduction in the gross long and 90k contract increase in the gross short.

On an individual contract level, selling was concentrated in gold, copper, soybeans, corn, and coffee while crude oil was mixed with WTI selling, being partly offset by Brent buying.

Crude oil and fuel products: The buying of 139k WTI contracts compared with 71k in Brent since the early June rally began, left the WTI mostly exposed to long liquidation as crude went into consolidation mode. Overall, it helps explain the 31k contract reduction in WTI and 20k increase in Brent. The three fuel product contracts held steady with tightness underpinning prices and positioning at or near 18-month highs
Gold, silver and copper: A fourth week of gold selling cut the net long to a five-month low at 46.5k contracts, while the silver and platinum net short positions continued to rise. In copper, two weeks of aggressive selling (-40k contracts) saw the net short jump to 18k contracts, a three-month high.
Grains: The combined grain and soybean long were cut to near neutral at 17k contracts, led by heavy corn and wheat short-selling, and some 100k contracts below the seasonal average for this period.
Softs & Livestock: The coffee short nearly doubled to 27k contracts as the Arabica futures contract slumped 6% on harvest supply pressure. Small gains in sugar and cocoa did not prevent a third week of selling
In forex, the week to August 15 showed a rotation by speculators from CAD and AUD to EUR, CHF, GBP and JPY, but overall the gross dollar short was left close to unchanged at $15.7bn. Biggest IMM currency positions currently held: EUR +160k lots ($21.8bn equivalent), GBP +4k ($4bn) & MXN +82k ($2.4bn) while the biggest short positions are in JPY -81k (-$7bn) and AUD -53k (-$3.5bn)
US bond futures: An across the curve leveraged fund short position is being offset by an equivalent asset manager long. Last week the combined net short in T-Bonds and T-Bonds Ultra reached a record 1.08 million contracts, representing a DV01 of 185 million dollars per one basis-point change in yield

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.