COT: Bullish commodity bets hit record low in week to Sept. 3

Ole Hansen

Head of Commodity Strategy

Summary:  Speculators cut bullish commodity bets to a record low just before the biggest one-day price jump since November. Short positions exist across most agriculture commodities while precious metals continued to be bought ahead of an abrupt change in sentiment driven by renewed trade hopes and weaker dollar.


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.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, September 3. This was the day when the market hit peak pessimism in response to the September 1 tariff hikes, Hong Kong and Brexit jitters. Developments which led to several false breakouts and subsequent reversals across several key markets from bonds, stocks and dollar to oil, copper and not least precious metals.

During the week speculators cut bullish bets to a record low of 38,605 lots. This just before the Bloomberg Commodity Index jumped the most since November. The agriculture sector continued to be sold with net-short positions being held in all but a couple of livestock contracts. Once again it was corn, wheat and sugar that was hardest hit with the latter reaching a fresh record of 189,100 lots. Crude oil traders made only small adjustments while precious and platinum group metals were bought

Precious metals continued to be bought ahead of the abrupt sentiment change towards the end of last week. The gold net-long surpassed the record from the previous week after rising by 2,858 lots to 290,709 lots. The 9% increase in the silver net-long to 63,466 was a relatively small response during a week where the metal rallied by 5%. This was also highlighted in the breakdown between long and short positions which showed that most of the increased was driven by short-covering not fresh longs. The 10% rally in platinum meanwhile led to a 169% jump in the net-long to 22,774 lots. Copper was close to unchanged with fresh long and short position being added as the contract temporarily hit a new two-year low

The combined net-long in WTI (-14k) and Brent (+18k) crude oil rose by 4k lots to 410,493 lots with speculators going in opposite directions for a second week. The net long has hardly moved during the past three months with Brent struggling to break away from $60/b and WTI away from $55/b. The improved technical outlook towards the end of last week however could add support to prices into a week full with oil market related events and news.

First up the market has to gauge the impact - if any - of the weekend announcement from Saudi Arabia that Prince Abdulaziz has taken over the energy ministry from Khalid Al-Falih. While we expect limited market impact it may still highlight the growing unease about an oil price stuck more than 20 dollars below the Kingdom's desired level. The new energy ministers will be attending the World Energy Congress (@WECongress) in Abu Dhabi before joining the OPEC+ JMMC meeting on Thursday. Apart from the weekly US stock report the three major forecasters EIA tomorrow,  OPEC on Wednesday and IEA on Thursday while all publish their monthly oil market reports. 

RBOB Gasoline saw the biggest change with a 31% reduction cutting the net-long to 41,807 lots, a two-year low.

Short positions across the three major crops reached 213,535 lots with the upcoming US harvest adding to bulging supplies while competition from other growers in South America and Europe remains due to the strong dollar and trade war with China.

In sugar the drop to 11 cents/lb, a one-year low, helped drive the net-short to a fresh record of 189,100 lots. India is preparing to dump subsidised stocks onto the global market in order to bring down bulging stockpiles. 

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.
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 S.A.R

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.