COMMODITIES 5 minutes to read

COT: Brent long vulnerable after buyers defy the charts

Ole Hansen

Head of Commodity Strategy

Summary:  Agricultural commodities led the broader commodities sector to a seven-week positioning low in the week to April 30.


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: Commodity report for the week ending April 30, click here.


Hedge funds cut bullish bets on rising commodity prices to 367k lots, a seven-week low, in the week to April 30. Selling was broad-based with 16 out of the 24 major futures contracts tracked in this report being sold. Apart from WTI crude oil and natural gas, the biggest casualties – again – were found among the agricultural commodities, particularly soybeans, wheat, sugar and live cattle.   

Despite the first weekly price drop in five weeks and an ugly, bearish weekly candle, Brent crude continued to be bought with the rising backwardation attracting buyers amid supporting fundamentals. WTI bulls, meanwhile, backed off and cut longs for the first time in 10 weeks ahead of weekly EIA data that showed record US production and stocks at their highest level since September 2017.

The continued drop in crude oil prices since the aforementioned weekly bar on April 26 has accelerated today in response to Trump’s renewed threat to hike tariffs on Chinese imports. The market has been pricing in a good deal since January, and with two tweets yesterday the president risked jeopardising the talks that were expected to step up a gear this Wednesday when a 100-strong Chinese delegation arrives in Washington. 

The tight and price-supportive fundamental outlook has not gone away but the lack of long liquidation last week has left the market exposed in the short-term. So far today, Brent crude oil has managed to bounce off the 50- and 200-day moving averages, both just above $69.20/barrel.
Weak natural gas prices are hovering just above key support due to massive supply gains as mild weather helped send the net-long to a three-year low of 46k lots.

The hedge fund short in HG copper expanded to a 12-week high at 10k lots ahead of the weak US/China PMI slump on May 1. The platinum net-long remained the largest among the metals at 22k lots
Gold, meanwhile, was bought to the tune of 33k lots, making the second-biggest week of buying this year. The move returned the position to a net-long and highlights the continued struggle for direction with a rising dollar and stocks being countered by central bank demand and a patient Federal Reserve.
The grains sector remained under pressure with the combined net-short in wheat, corn and soybeans reaching a fresh record of 539k lots, some 488k lots higher than the seasonal five-year average. Soybeans struggled amid slowing demand from China due to trade war and the continued culling of millions of pigs due to the swine fever outbreak. 

Corn, which remains by far the most sold of the agricultural commodities, found some support from rain-delayed planting which could force some farmers to switch to later-planted soybeans. Kansas wheat hit a fresh record short as the price dropped below $4/bu to challenge the lowest levels since 2006. 
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.
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