COT: Speculators dump crude oil on China concerns COT: Speculators dump crude oil on China concerns COT: Speculators dump crude oil on China concerns

COT: Speculators dump crude oil on China concerns

Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, November 29. A week that apart from commodities, which responded negatively to China protests, traded calmly ahead of key US economic data prints and a key speech from Fed Chairman Powell.


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.
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

 

Financial Markets Daily Quick Take
Saxo Market Call Daily Podcast


This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, November 29. A week that, apart from some commodity sectors, saw markets trade calmly ahead of key US economic date prints and a key speech from Fed Chairman Powell. Overall, the S&P 500 and the dollar traded softer with bonds seeing a small bid. 

Commodities

Concerns about the economic impact of fresh lockdowns in China and not least growing protests against the government's handling of Covid outbreaks, saw the Bloomberg Commodity index trade down 1% with a 3.2% loss across the energy sector being only partly offset by gains in precious and industrial metals, as well as grains. Hedge funds, responding to these developments, sold energy led by Brent crude oil while small amounts of profit taking reduced length in gold, copper and sugar. In demand were silver, soybeans, corn and coffee. 

Overall, the net long across 24 major commodity futures saw a small 2% reduction to 1.13 million contracts representing a notional value of $68 billion. The total open interest across the 21 most traded futures contracts meanwhile dropped to a fresh and near ten-year low at 12.69 million lots. Led by a slump in energy where the short-term outlook has become increasingly murky as recession concerns battle Russian sanctions impact and OPEC+ production cuts. Since peaking at 8.7 million lots on January 28, the open interest across the six major energy contracts tracked in this has slumped by 30% to the current 6.1 million lots. 

Energy

Hedge funds continued to aggressively sell crude oil futures in the week to November 29 as demand concerns from renewed China lockdowns and the general risk of an economic slowdown hurt prices and sentiment. During the last three reporting weeks the combined net long in WTI and Brent has been cut by an aggressive 187k lots or 41% to 265k lots, and lowest since April 2020 when the pandemic saw prices collapse.

T
he bulk of the reduction last week was seen in Brent where the combination of 21k lots of long liquidation and 18k lots of fresh short position drove a 28% reduction in the net long to 99k lots.  driven by 39k lots reduction in the Brent crude net long to 99k. Additional, but muted long liquidation also helped reduce the net long positions in gasoil and RBOB gasoline.

Metals

Speculators were small sellers of gold for a second week with some profit taking emerging following a month that saw the yellow metal jump by more than 8% to record its strongest month in 28 months. Silver, up almost 16% in November, saw fresh buying with the net long at 14.7k lots being near the highest level since May. Copper had a relatively strong week with China concerns having a limited impact on the fund position and the price action. Overall, the net long saw a small 7% reduction to 12.7k lots

Agriculture

Buyers returned to the grains sector following three weeks of net selling. Demand, however, was concentrated in the soybeans complex (+28.2k lots) and corn (+21k lots) while out of favor CBOT wheat saw its net short extend further to reach 54k lots, the biggest bet on falling prices since May 2019.

In softs, some small profit taking emerged in sugar following a three-week buying spree that lifted the net long by 358% to 197k lots. Additional and fresh selling was seen in cocoa and cotton while coffee buyers emerged for the first time since September to cut their net short by 9% to 19k lots. 


Forex

In forex, the combined dollar position against nine IMM futures and the Dollar index returned to a small net long with broad but small buying of dollars seen against most currencies, led by JPY and CAD. Length remains concentrated in EUR which at 122k lots or €15.3 billion represents the strongest belief in the euro since March 2021. 

Disclaimer

The Saxo 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 Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, 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 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 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 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 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 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-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.