COT: Oil buying accelerates; gold long deflates further

Ole Hansen

Head of Commodity Strategy

Summary:  COT on commodities in week to November 12 showed how U.S.-China trade hopes continued to attract strong buying interest in crude oil while long liquidation in metals continued. The grains sector were mixed while all four soft commodities, led by coffee, were bought


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 12. The report covered a week where the markets were buoyed by hopes that a “phase one” U.S.-China trade deal was getting close to being finalized. Volatility and gold continued to be sold while both the dollar and oil received a bid.

The prospect for a growth stabilizing trade deal supported continued hedge fund buying in crude oil while long liquidation in metals, led by gold, continued. Grains were mixed while all four soft commodities were bought, not least coffee. 

Several +20,000 lots changes were seen on both the buy and sell side with the biggest being WTI, Brent, gold, soybeans, sugar and coffee. 

Buying of crude oil continued to accelerate with the net long in Brent and WTI jumping by a combined 65,115 lots valued at close to $4 billion. The total reached 463,935 lots, the highest since September 24 with the pace of buying during the past four weeks being the strongest since April. Short seller capitulation in WTI drove the move last week with the gross-short being cut by 44,228 lots or 41%.

Gold longs continued to be reduced in response to the latest price drop which saw the metal challenge key support below $1450/oz. From a record high on September 24 the net-long has since been cut by one-third and last week it reached 200k lots for the first time since June. Bullish bets on silver meanwhile has now been cut in half since September to 32.6k lots, not far from the 27k five-year average. 

Grains were mixed with soybeans suffering the biggest amount of long liquidation after the price dropped  to a six-week low. This in response to ample U.S. supplies and some trade pessimism related to weaker Chinese demand. Wheat saw small amount of buying while corn continued to be sold despite ongoing harvest delays raising questions about the USDA’s optimistic yield and production forecasts.

Soft commodities were all bought with short covering in coffee driving a 72% reduction in the net short to 11,420 lots while the 5% weekly price surge in cocoa attracted additional buying with the net long rising to 45,290 lots, just a whisker below the July peak at 46,648 lots.    

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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