COT: Commodities bought despite weak price action

Ole Hansen

Head of Commodity Strategy

Summary:  Hedge funds were net-buyers of commodities for a second week to March 31. This despite weak price action as the demand outlook continued to deteriorate with countries representing +90% of global GDP experiencing different levels of lock downs. The period tracked the aftermath of the March 23 announcement of open ended QE by the US Federal Reserve and a week where crude oil hit an 18 year low.


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, March 31. This period tracked the aftermath of the March 23 announcement of ‘open ended’ QE by the US Federal Reserve. Stocks rose, credit recovered, the dollar weakened while crude oil hit an 18-year low. Most commodities traded weaker as the demand outlook continued to deteriorate with countries representing +90% of global GDP experiencing different levels of lock downs.

Funds nevertheless increased bullish for a second week by 20% to 433k lots. This despite seeing a 5.5% drop in the Bloomberg Commodity Index. Buying was concentrated in natural gas, which hit neutral despite slumping to a 25-year low, soybeans and wheat while gold, sugar and cocoa saw most of the selling.

Energy: Crude oil selling slowed as the price hit an 18 year low. The combined net long was cut by just 4k lots to 183k lots, the lowest since 2012. Behind the small net change however was some major changes in the long (+32k lots) and short (+36k lots) positions. New longs emerged on hopes that the price collapse would force renewed production cuts.

Metals: Profit taking cut the gold long to near the lowest since last June while short covering supported a 19% increase in the silver long. The reduction in HG copper short positions extended into a seventh week. The price has settled into a relative tight $2.15 to $2.25 range with a recovering China, government stimulus and virus-led supply disruptions off-setting a global recession and slowdown in demand.

Agriculture: The sector was mixed with the pandemic having a negative impact on sugar (biofuel link to oil), cotton (collapsing clothes sale and lower prices on oil based synthetic fibers) and cocoa due to the emerging recession. Wheat, coffee and soybeans all finding support from either supply disruptions or rising demand.

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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