COT report: Geopolitics meets sceptical positioning as 2026 begins

Commodities

In energy, crude oil (Brent and WTI) saw a modest reduction in the combined net long as prices softened amid an overriding supply glut focus, underlining a market where additional liquidation still appears to require a clear downside technical break that has yet to materialise. This leaves the market vulnerable to a rebound should either the technical or fundamental outlook improve. The lack of appetite for oil exposure was underlined by a recent Goldman Sachs survey showing institutional investors holding their most bearish view on oil in a decade. In the short term, however, the deteriorating situation in Iran and continued sanctions on Venezuela — where the prospects for a rapid recovery in production remain very limited — helped trigger renewed buying after both WTI and Brent held key support during early-January selling. Elsewhere, US natural gas extended its sharp sell-off, with the net long slashed by 36% amid another week of heavy losses.

In metals, the renewed geopolitical bid that drove a strong start to the year had only a limited impact on positioning. Gold was sold by leveraged funds, while silver, platinum and palladium attracted modest net buying. Copper’s 5% rally was meanwhile used as an opportunity to reduce exposure, with the net long trimmed by around 5%, reflecting growing caution after last year’s powerful rally and against a backdrop of rising exchange inventories.

The ongoing annual rebalancing of major commodity index funds, and the short-term uncertainty it creates, likely also helped explain why both long and short positions were reduced in gold and silver. So far, both metals have absorbed the mechanical selling remarkably well, highlighting that well-telegraphed flows often fail to have the impact many anticipate. Potential buyers who had been waiting for better entry levels into the new year have instead been forced back into the market as Trump-related risks, geopolitical tensions, and renewed concern over US debt and Federal Reserve independence have lifted safe-haven demand.

Volatility is therefore likely to remain elevated, but as highlighted in recent updates, a continued rise in gold and silver through the rebalancing window would send a powerful signal about the depth of underlying demand for the ultimate safe havens.

In agriculture, grains saw net selling led by soybeans and wheat. The soft complex was more mixed, with sugar sold while coffee and cocoa attracted buying. Notably, cocoa still carried a net short position ahead of its return to the BCOM index — an event expected to trigger substantial mechanical buying — highlighting the lack of conviction in higher prices going into the rebalancing window. That scepticism proved well-founded on Friday when cocoa slumped 12% as front-running longs, positioned for a rebalancing-driven squeeze, were forced to liquidate after exporters took advantage of the index-related liquidity to sell.

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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's 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

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.