Head of Commodity Strategy
Summary: Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, December 27. A week that saw speculators showing a continued and broad interest in adding exposure to commodities, led by oil, gold and corn. The dollar short extended further as the euro long reached a 23-month high
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 reasons why we focus primarily on the behavior of the highlighted groups are:
During the reporting week all but one of the 24 major commodity futures tracked in this saw net buying, resulting in the combined net long rising by 16% to 1.4 million lots, a six-month high. Two-thirds of the increase was driven by fresh longs being added while the remaining third was driven by traders cutting back on short positions. With all sectors getting bought with natural gas the only exception, the driver behind these developments has to be found in overall macroeconomic developments, most notably the weaker dollar and emerging optimism about the demand outlook in China.
In softs, the sugar net long jumped to 258k contracts to a 16-month high and not far from the peaks in 2016 (286k) and 2021 (270k) which both ended up signaling months of subsequent selling. The cocoa position flipped back to a small net long after 19k contracts were added in a week that saw the price jump 5.4%.
Speculators was leaving 2022 behind holding the biggest dollar short since July 2021. Against nine IMM futures and the Dollar Index, the gross dollar short reached $7.4 billion with a $19.6 billion equivalent long in the euro being partly offset by short, albeit reduced, positions in JPY, AUD, CAD and MXN. The additional length being added to the euro long occurred ahead of Thursday’s Golden Cross when the 50-day simple moving average crossed above the 200-day. The 3% increase lifted the net long to a 23-month high at 146k contracts.
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