COT: Oil net-long slips lower as prices rally

Ole Hansen

Head of Commodity Strategy

Hedge funds maintained an overall unchanged position measured in lots across 24 major commodities futures in the week to February 20. Continued selling across the energy and soft sectors was countered by renewed buying of metals and continued buying of grains. 

Leaderboard

The combined crude oil long was reduced for a fourth week despite seeing oil in recovery mode for the past couple of weeks. A triple whammy of price-supportive data provided by the EIA on its latest inventory report helped support a strong close on the week.  

Brent & WTI managed money positions

Natural gas net-longs were cut further as the price stayed precariously close to key support at $2.5/therm.

Gold buyers returned to add 4%, which brought the net-long to 71% of the September record. The net-short in silver, meanwhile, extended further to reach 75% of the record 14,000 lots reached on December 19.

Precious metal managed money positions

The copper net-long jumped by 30% ahead of the re-opening of the Chinese market with most of the change being driven by short-covering. While investors await an expected post holiday pick-up in Chinese demand, the downside risk for now seems limited with HG Copper currently trading within a $3 to $3.3/lb range.

HG Copper

Overall, the agriculture sector led by grains seems to have woken up from a multi-year snooze with record high stock levels increasingly being challenged by an uncertain production outlook. During the past month, a rising weather premium has emerged after extreme heat in the southern hemisphere and extreme cold across the northern hemisphere impacted a variety of food commodities from soybeans to wheat and cocoa.

Additional support has come from the weaker dollar, strong demand, and rising energy prices as well as short covering from hedge funds, which have been reducing a record grain short back to neutral during the past four weeks.  

Funds turned net bullish on the three major crops for the first time in six months after having covered a record short of close to 500,000 lots in just five weeks.

Agriculture managed money positions

In cocoa, a 16% rally this year continues to attract fresh fund buying with the net-long reaching a 16-month high. Crop quality concerns combined with robust demand has left the market relatively tight with the bulk of West Africa’s main harvest almost completed. 

Cocoa managed money positions

You can access both of our platforms from a single Saxo account.

Disclaimer

The Saxo Bank 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 Rules of Engagement and (v) Notices applying to 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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/legal/disclaimer/saxo-disclaimer)