The biggest casualties were WTI crude oil, HG copper, soybeans, sugar, cotton and live cattle. Only six out of 24 commodities were bought with gas oil, corn and gold attracting most of the attention.
Crude oil positioning continued to diverge with accelerated selling of WTI (-29k lots) being partly offset by the continued buying of Brent (+2k). The behaviour of Brent especially raising questions about the strength of the current price weakness.
1) The steepness of the Brent forward curve points to an increasingly tight physical market caused by multiple voluntary and involuntary supply disruptions.
2) During the last two reporting weeks, Brent sank 5.4% while the net-long increased by 10k lots. Last week most of the increase in the net-long was due to short-covering not long liquidation, another sign of limited selling appetite despite lower flat (spot) prices.
Gold was bought for a second week but the limited amount of short-covering highlights the yellow metal’s current struggle to gain momentum. All other metals were sold, not least HG copper where the net-short jumped by 173% to 27k lots, a 14-week high.
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.
Ole Hansen, Head of Commodity Strategy at Saxo Bank.