COT: Buyers rushed into oil ahead OPEC meetings

Ole Hansen

Head of Commodity Strategy

Summary:  The COT report covering the week to November 26 found that speculators were strong buyers of crude oil and soft commodities. Selling hit natural gas, gold and not least the soybean complex.


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 key commodity futures up until last Tuesday, November 19. The highlights in the report, delayed from last Friday due to a U.S. holiday, were strong buying of crude oil in the run up to the December 5 and 6 OPEC meetings in Vienna, strong selling of soybeans due to lack of Chinese buying as the prospect for a "phase one" trade deal hung in the balance. All soft commodities were bought with funds turning bullish on Arabica Coffee for the first time in two years as supply continued to tighten.

Hedge funds bought 103k lots of WTI and Brent crude oil. This the biggest weekly increase since December 2016 took the combined net-long to 548k lots, a six-months high. The accumulation of longs occurred in response to emerging speculation that the OPEC+ group would extend production cuts to support the price during the first half of 2020.

The strong buying also helps to explain the unusual big sell-off last Friday. A move that was difficult to explain given the prevailing news flow at the time. 

Gold was sold and silver bought during a week where both metals traded within their established ranges which for gold is between $1448/oz and $1478/oz. While we maintain a positive 2020 outlook for the gold and semi-precious metals the past few weeks have seen positions being scaled back ahead of year-end. Potential investors are unlikely to engage at this time unless the mention range is broken. 

All four soft commodities were bought as the fundamental outlook continued to provide support, not least for cocoa and coffee. The net-long in cocoa reached a five-year high at 66k lots while speculators turned bullish coffee for the first time since April 2017. During the past two months the price has rallied by one-third in response to an outlook for tighter supply into 2020. 

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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