COT: Funds cut oil long to 16-month low ahead of Opec+ U-turn

Commodities 7 minutes to read

Ole Hansen

Head of Commodity Strategy

Summary:  Leveraged funds cut bullish commodities bets by just 4% in the week to November 6. Continued heavy selling of crude oil and products were somewhat offset by a pickup in demand for metals and grains.


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: Commodities report for the week ending November 6, click here.
First, the reasons why we focus primarily on the behaviour of leveraged 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.


In my latest webinar I spent the first part talking about the COT report and how to read the table below. 
The crude oil slump, which extended into a fifth week continued to attract long liquidation and fresh short-selling from hedge funds. Nine weeks of  continued selling has resulted in the WTI net-long reaching a 14-month and Brent at 16-month low. Soaring crude oil production and reduced worries about US sanctions' impact on Iran have raised the pressure on Opec and Russia to stop the rout and that seems to be what they will accomplish at this weekend’s Joint Opec/non-Opec Ministerial Monitoring Committee (or in short, Opec+ meeting) in Abu Dhabi. 

Saudi Arabia, under pressure from President Tump, raised production by 700,000 barrels/day between June and October said after the meeting that they would now reduce crude sales in December by 500,000 barrels/day. In response to the 20% drop since early October the  Opec+ warned in a statement that a new strategy was needed and this has raised speculation about coordinated cuts in 2019.
Hedge funds reduced bearish gold bets by 18% before renewed price weakness ahead of the weekend. The drop on Friday was driven by continued dollar strength and stronger than expected PPI that helped support the Federal Open Market Committee’s plan to keep raising rates.  Silver, which almost touched the top and bottom of its three-month range last week, was also bought ahead of the slump.
The biggest jump in platinum demand since January, which followed nine weeks of buying, has taken the net from a record short to a 10k lots long. HG Copper traders remained undecided with the net-short once again moving towards neutral as growth worries offsets signs of a tight market. 
Grain traders cut a net-short in soybeans by 37% while adding further length to corn ahead of last Thursday’s World Agriculture Supply Demand (WASDE) report from the US Department of Agriculture.   
In softs, coffee short-covering continued for a seventh consecutive week despite renewed price weakness following the 31% September to October surge. Sugar ran into profit taking as the price retraced almost of half of the recent 31% rally. 
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