Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
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Head of Fixed Income Strategy
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COT: Oil bulls firmly in control before Libya lift
Ole Hansen
Head of Commodity Strategy
Summary: Gold and silver were sold off heavily in the week ending March 19 while oil bulls continued their rampage, boosted by the latest outbreak of rebellion in Libya.
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.
To download your copy of the Commitment of Traders: Commodity report for the week ending March 19, click here
Hedge funds sold commodities for the first time in four weeks during the week to April 2. The 85k contract reduction in the net-long to 537k was driven by heavy selling of gold and silver as the risk-on rally in stocks continued. The USDA acreage report triggered renewed selling of corn and soybeans while short-covering supported sugar and cocoa.
Non-stop buying of crude oil extended to a sixth week with the combined net-long in Brent (+27k contracts) and WTI (+7k) reaching 593k lots, the highest since last October.
Renewed fighting in Libya, this time close to the Tripoli, has seen Brent crude break above $70/b. It raises the risk of a civil war between numerous militias, some supported by foreign governments. Libya’s production reached 1.1 million barrels/day last month according to a Bloomberg survey. While its oilfields are located far from Tripoli it nevertheless raises the temperature a few more notches. Not least given ongoing production cuts from Opec and Russia together with the sharp reductions due to crisis and sanctions from Venezuela and Iran. All in all it has created a very lonely place for the those looking for lower prices, especially President Trump who is now faced with the highest seasonal cost of US gasoline since 2014.
Gold and silver’s appeal faded again in response to rising stocks, bond yields and the dollar. As the price of gold dropped back below $1,300/oz the net-long in gold was cut in half to just 39k contracts, a ten-week low, while the out of favour silver saw a return to a net-short for the first time in four months.
The net-long in platinum held steady before an alignment of fundamentals and technical developments drove it sharply higher. Copper’s current range bound trading behavior has led to a neutral stance among funds.
The grain sector saw renewed selling in the aftermath the USDA’s March 29 acreage and stock reports. Not least corn which at 247k contracts remains by far the most shorted grain contract at this stage. Ahead of the important planting and growing season the combined net-short across the three major crops of corn, soybeans and wheat has never been higher for this time of year.
The grain sector saw renewed selling in the aftermath the USDA’s March 29 acreage and stock reports. Not least corn which at 247k contracts remains by far the most shorted grain contract at this stage. Ahead of the important planting and growing season the combined net-short across the three major crops of corn, soybeans and wheat has never been higher for this time of year.
A 5% jump in the price of cocoa on dry conditions in the Ivory Coast helped trigger a 27% reduction in the net-short position. Continued short-covering has seen it rise 11 consecutive days up until Friday. The continued surge in Lean hog prices on the back of strong Chinese demand for US pork, supported a 52% jump in the net-long to 37k contracts. Some 2k below the recent peak from last November.
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.
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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