Head of Commodity Strategy
The Middle East war continued to underpin dollar strength in the week to 17 March, triggering exceptionally large flows across the major IMM futures. The euro experienced its largest amount of weekly long liquidation on record, as investors reacted to the region’s deteriorating growth outlook amid surging gas and fuel costs. The EUR net long was slashed by 80%, with 84k contracts of selling—equivalent to USD 12.2 billion. Over just five weeks, positioning has reversed sharply from a near three-year high of 180k contracts to a one-year low of 21k. In Japan, heavy selling pushed the JPY net short to a 20-month high of 68k contracts, while CAD positioning was reduced to neutral. Against this backdrop of broad dollar strength, speculators covered shorts in both GBP and CHF, while the AUD long extended to a fresh nine-year high. Overall, these aggressive adjustments resulted in USD 11 billion of net dollar buying—the largest weekly increase since June 2018—flipping the aggregate position back to a net long of USD 6.3 billion.
The latest COT report for the week ending 17 March captures a period dominated by the ongoing Middle East war, which has triggered the largest disruption to global energy supply on record. This drove a 3% rise in the Bloomberg Commodity Index, led by strong gains in the energy sector—most notably an almost 18% surge in Brent crude. These gains helped offset losses elsewhere, particularly across precious and industrial metals.
The agriculture sector traded mixed, with losses in soybeans and cocoa partly offset by gains in other markets, most notably cotton and livestock.
Rising fuel costs were the primary driver of positioning changes. Hedge funds increased exposure not only across energy but also in second-round beneficiaries, with growing interest in biofuel and ethanol-linked contracts such as corn, soybean oil, sugar, and cotton. In contrast, precious and industrial metals came under pressure amid rising inflation concerns lowering rate cut expectations and a deteriorating growth outlook.
The net long in crude oil has, over the past five months, shifted from a record low to a four-year high of 554k contracts. The bulk of this increase has been concentrated in Brent, where the net long has surged to an eight-year high of 429k contracts—highlighting the scale and speed of the turnaround in managed money positioning across crude markets.
In grains, speculative positioning—led by soybeans and corn—continues to recover, supported by dry weather concerns, stronger biofuel-linked demand amid elevated energy prices, and rising fertiliser costs increasing supply risks.
Over the eight weeks to 17 March, the combined net position across the six grain futures tracked in this report rose sharply from a net short of 258k contracts to a four-year high of 635k contracts. CBOT wheat, which has held a net short since July 2022, is now close to flipping into a net long, while net long positions in soybean meal, soybean oil, and corn have all climbed to one-year highs.
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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:
Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.
| More from the author |
|---|
|
Precious metals hit by liquidity shock as war forces repricing
Outrageous Predictions
Head of Investment Content Switzerland
Outrageous Predictions
Senior Relationship Manager
Outrageous Predictions
Saxo Group
Outrageous Predictions
Chief Investment Strategist
Outrageous Predictions
Chief Investment Strategist
Outrageous Predictions
Global Head of Macro Strategy
Outrageous Predictions
Global Head of Investment Strategy
Outrageous Predictions
Global Head of Investment Strategy
Outrageous Predictions
Investor Content Strategist
Outrageous Predictions
Global Head of Macro Strategy