COT: COT: COT:

COT: Crude oil sees fastest buying pace in two years

Ole Hansen

Head of Commodity Strategy

Summary:  This COT report highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, January 18. A reporting week that ended with a deepening selloff in stocks as bond yields continued to climb and where commodities continued do attract demand drifen by tightness in energy, industrial metals and some soft commodities


Saxo Bank publishes 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.

Daily Market Quick Take
Daily Saxo Market Call Podcast



This summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, January 18. A reporting week that ended with a deepening selloff in stocks as bond yields continued to climb on speculation the Federal Reserve will have to boost interest sooner and by more than previously expected. Treasuries fell along the curve, pushing yields up to levels last seen before the pandemic shook the markets nearly two years ago. The dollar held steady while commodities continue to attract demand with tightness in energy, industrial metals and some soft commodities shielding the asset class from being caught up in the risk aversity seen elsewhere. 

Commodities

The Bloomberg Commodity Index rose 1.3% during the week, with strong gains in energy and softs, and to a lesser extent metals offsetting another week of losses across the grains sector. These developments helped drive 51k lots of net buying across 24 major commodity futures from large speculators, bringing the total net long to a two-month high at two lots. Buying was concentrated in WTI crude oil, gas oil, natural gas and cocoa with net selling mostly impacting the grains sector.

Energy: Speculators continued their rapid accumulation of length in crude oil futures and during the past four weeks, the net buying of WTI and Brent reached 155k lots, a rapid four-week accumulation of this magnitude was last seen in January 2020, just before the pandemic temporary sucked the life out of the market. The combined net long reached a ten-week high at 559k lots or 559 million barrels with WTI buying of 23.7 lots offsetting a small 2k lot reduction in Brent. Even though it was small, the reduction in Brent may signal fading belief in its short term ability to break above $90, a level that was almost reached during the week.

MetalsThe gold net long was reduced for a third week, albeit at a slower pace. The 4% reduction to 84.5k was primarily driven by fresh short-selling from funds fading the rally towards $1830, a recent resistance level now turned support. Silver’s emerging relative strength which during the week saw the gold-silver ratio drop by 3.4% helped drive a 33% increase in the net long to 23.8k lots, a seven-week high. Copper’s one percent weakness did not deter traders, as they increased their net long to near a three month high at 28.2k lots. In platinum, the net short was reduced by 62% to just 1.3k lots.

Agriculture: Speculators reduced length in soybeans and corn while wheat was mixed with buying of Chicago and selling of Kansas. In softs, cocoa and coffee saw strong buying interest. Despite rallying by 3% the net long in sugar kept falling to reach a 19-month low., thereby making it a potential strong recovery candidate with surging fuel prices raising the prospect for increased bio-fuel production. Cotton's 4.4% jump only attracted a small amount of additional buying from funds seeking to get involved in the commodity with the highest roll yield, currently around 20% on a one-year basis. 

Forex

In forex, speculators responded to the latest stock market weakness by aggressively selling dollars. Against ten IMM currency futures and the Dollar Index the net dollar long was reduced by 30% to a four month low at $16.5 billion, and the most aggressive week of dollar selling since June 2020. All of the major IMM futures contracts with the exception of CHF got bought, led by EUR where 18.6 lots of buying tripled the net long to 24.6k lots. The Sterling short was removed following 29k lots of buying while the CAD position flipped to a net long of 7.5k lots after speculators bought a total of 14.9k lots.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • 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/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.