Welcome to Saxo Bank Hong Kong

Please select your language
Commodities 6 minutes to read

COT: Funds cut bullish oil bets ahead of US sanctions

Ole Hansen

Head of Commodity Strategy

Summary:  Leveraged funds cut bullish commodity bets by the most since July during the week to October 30. During this time, the dollar strengthened further while global stocks remained under pressure from growth and trade war concerns.


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 October 30, click here.

First, the reasons why we focus primarily on the behaviour of leveraged 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.


Leveraged funds cut bullish commodity bets by the most since July during the week to October 30. During this time, the dollar strengthened further while global stocks remained under pressure from growth and trade war concerns.

The selling was broad-based with 19 out of 26 futures being sold, not least the energy and grains sectors. As a result, the total value of the open interest across these major commodity futures dropped below 1,000 billion for the first time since March. 

The steep decline in bullish crude oil bets extended to a fifth week with the net-longs in WTI and Brent reaching 13- and 15-month lows respectively. Producers pumping at will together with a clouded outlook for demand and reduced concerns about Iran sanctions has raised the question of whether we have seen a fundamental shift in the market. In order to gauge whether this is the case, the market will be watching closely the price behaviour as WTI approaches $60/barrel and particularly Brent at $70/b, a level which has provided resistance and then support on several occasions since January.  
Gold is currently stuck in a range between $1,210 and $1,240/oz and the 74% reduction in bearish gold bets during the previous two weeks and the stronger dollar at the beginning of last week helped trigger renewed selling and a test of support. However, the 19,000-lot increase in the net-short helped support gold towards the end of the week when the dollar weakened, especially against CNY.

In copper, hedge funds more than doubled bearish bets ahead of the near 7% surge towards the end of last week. This after China signalled increased urgency for further stimulus measures and US president Trump said he had a productive conversation with Chinese president XI Jinping. Platinum, meanwhile, returned to neutral after funds cut net bearish bets to a seven-month low. 
The grains complex was sold across the board with net-shorts in soybeans and wheat extending further on harvest pressure and export challenges due to tariffs and the strong dollar. 

Sugar and coffee continued to be bought despite some emerging profit-taking in the Brazilian real following last week’s election. The net-long in sugar was the highest since March 2017 while the net-short in coffee reached a 13-month low following a 76% reduction during the past six weeks.

Disclaimer

The Saxo Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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)

Saxo Capital Markets HK Limited
Rooms 2001-02, 20/F York House
The Landmark
15 Queen's Road Central
Hong Kong

Hong Kong

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

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

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.