Quarterly Outlook
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COT: Commodity speculative long jumps 51%
Ole Hansen
Head of Commodity Strategy
Summary: Hedge funds increased bullish commodity bets for the first time in three weeks. The 51% jump in the net-long to 463k lots came in response to broad-based price gains across all of the major sectors. The buying was centered around crude oil, gasoline, gold, soybeans, sugar and livestock.
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
The agriculture sector saw nine out of 14 futures contract being bought. The sector, as we wrote last week, was increasingly exposed to short-covering after bearish bets reached a record in recent weeks. These developments highlight why we primarily focus on the positions held by leveraged money or hedge funds. These types of traders are most reactive to changes in fundamental or technical price developments. So while the report below give us useful information about the current major trends it also helps to decipher when a potential reversal is looming.
To download your copy of the Commitment of Traders: Commodity report for the week ending March 19, click here
The agriculture sector saw nine out of 14 futures contract being bought. The sector, as we wrote last week, was increasingly exposed to short-covering after bearish bets reached a record in recent weeks. These developments highlight why we primarily focus on the positions held by leveraged money or hedge funds. These types of traders are most reactive to changes in fundamental or technical price developments. So while the report below give us useful information about the current major trends it also helps to decipher when a potential reversal is looming.
In crude oil the combined net-long jumped the most in seven months after the Opec+ meeting in Baku led the market to believe that Saudi Arabia and others would seek an even higher price. WTI (+54k lots) led the charge over Brent (+16k) while the combination of longs being added and shorts being cut helped raise the long/short ratio above 5 (longs to each short). This was the highest level since October, just before the price collapse accelerated.
The gold net-long increased by 16k lots to 58k lots, a 3-week high in anticipation of a dovish Federal Open Market Committee meeting, while silver struggled to garner much interest. Having bought gold near the $1,350 high and subsequently selling near the $1,280 low, hedge funds have been struggling with the lack of momentum in recent weeks.
HG copper saw the recently established net-long being cut by 41% to a three-week low. This was before dismal German manufacturing data on Friday sent the price sharply lower to a two-months low.
The agriculture sector finally saw some sporadic buying return which helped reduce the overall record short by 79k lots. Short-covering supported soybeans, sugar and cotton.
Following the cut-off date last Tuesday, the combination of a record short, a weather forecast for rain delayed the start of the US planting season and the biggest spot sale to China in five years last Friday has driven corn to a three-week high. Staying with grains, the news from US federal weather agencies that some areas my face record floods through May is likely to provide some general short-term support to the sector over. The important planting season will begin soon and on Friday, March 29, the USDA will release its “Prospective Planting Report” in which sum up their views on the acreage allocation for key crops this coming season.
The agriculture sector finally saw some sporadic buying return which helped reduce the overall record short by 79k lots. Short-covering supported soybeans, sugar and cotton.
Following the cut-off date last Tuesday, the combination of a record short, a weather forecast for rain delayed the start of the US planting season and the biggest spot sale to China in five years last Friday has driven corn to a three-week high. Staying with grains, the news from US federal weather agencies that some areas my face record floods through May is likely to provide some general short-term support to the sector over. The important planting season will begin soon and on Friday, March 29, the USDA will release its “Prospective Planting Report” in which sum up their views on the acreage allocation for key crops this coming season.
Meats are on the move with the live cattle net-long hitting a record high while a continued surge in lean hogs finally saw the speculative position switch to a net-long:
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.
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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