COT: Bullish commodity bets slump to 2½-year low on trade war, dollar

Ole Hansen

Head of Commodity Strategy

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.

To download your copy of the Commitment of Traders: Commodities report for the week ending September 11, click here

Leveraged funds continued to reduce bullish bets across 25 major commodity futures in the week to September 11. Overall a net-short is currently seen in both metals and agriculture with trade war and EM concerns, together with the stronger dollar, all weighing on sentiment. Crude oil, meanwhile, is being supported by the risk of lower supply from Iran and Venezuela. 
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The combined net-long across the 25 commodities tracked in this report was reduced by 8% to 808,000 lots, a 2½-year low, with selling of energy and grains being the main driver last week.
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Changes in the crude oil positions highlighted the recent shift towards Brent crude (+23,000 lots) as its premium to WTI (-19,000 lots) rose and its backwardation jumped. This in response to supply worries from Iran, Venezuela, and Libya being a bigger short-term concern than emerging signs of EM growth and demand slowdown. 
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All five metals were bought as the dollar struggled to extend its recent run of gains and as the market speculated about a possible easing of trade war tensions. These improved conditions, however, only lasted until last Friday when news broke that President Trump had been telling aides to proceed with additional tariffs. Those tariffs could be announced as early as today with speculation homing in on a 10% tariff on $200 billion worth of Chinese imports.  

The gold and silver net-shorts remain close to record levels with the short-covering seen last week not being enough to push the prices above levels where bearish traders would start to worry. 
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Grain traders were net-sellers ahead of last Wednesday’s WASDE report which helped send all three crops sharply lower. The combined net-short in soybeans, wheat, and corn remains close to its five-year average for this time of year.

The biggest change was seen in Chicago wheat where the net-long was reduced by 57%.
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In soft commodities the biggest change was the 19% reduction of the sugar net-short. This as the rally from a 10-year low at 10 cents/lb gained some additional momentum from improved fundamentals.
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