Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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COT report: Broad retreat sees WTI longs slump to 15-year low; Accelerated selling of USD
Ole Hansen
Head of Commodity Strategy
Key points:
- Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week ending Tuesday, 25 February, 2025.
- Speculators abandoned USD longs in droves, primarily driven by demand for EUR and JPY
- In commodities, broad selling emerged across all sectors following weeks of strength that had lifted the hedge fund long to a 2.5-year high.
- Selling of crude oil was particularly aggressive, not least in WTI, where the long slumped to near a 15-year low.
- Weeks of strong performances finally triggered some profit-taking and reduced positioning across precious and industrial metals.
- All but two of the 15 agricultural commodities tracked in this saw net selling spread across all three sub-sectors of grains, softs, and livestock.
Forex:
In the forex market, speculators abandoned long USD positions in droves during the week to 25 February, a week that saw the dollar index soften by 0.7%. Overall, the gross US dollar long was cut by one-third to USD 15.4 billion, led by a halving of the euro short to 25.4k contracts, and a 58% jump in the Japanese yen long to a record high of 96k contracts, coincidentally leaving it exposed to USDJPY rebound.
Six weeks of accelerated greenback selling has now more than halved the gross USD long, but looking at the underlying components, the biggest, and only, bet against the dollar is the mentioned elevated JPY long, while the major positions supporting a stronger dollar remain against the CAD, EUR, and CHF.
Commodities:
Broad selling emerged across the commodities sector in the reporting period to 25 February, a week that, following a period of solid gains, saw the Bloomberg Commodity Index give back almost 2%. All sectors traded lower, with the agriculture sector particularly hard hit, while also the energy, precious, and industrial metal sectors were left exposed to selling. Overall, the combined net long position held across 27 major futures markets tracked in this, saw a 12% reduction from the 2-1/2 year high at 1.69 million contracts reached in the previous reporting week.
On an individual level, the selling of crude oil was particularly aggressive, not least in WTI, where the net long on the main CME-traded contract slumped to a near 15-year low at just 67.6k contracts, a far cry from the 250k contracts hedge funds held on 21 January. During this five-week period, the combined net long in WTI (CME and ICE) and Brent has almost halved to 260k contracts, as the technical outlook continued to deteriorate amid worries about a global trade war’s impact on demand and OPEC+ considers when to start tapering production cuts. In natural gas, emerging profit-taking saw the net long reduced after hitting a four-year high in the previous week.
Weeks of strong performances finally triggered some profit-taking and reduced positioning across precious and industrial metals, as well as platinum-group metals. However, while the reductions seen in gold and silver were primarily driven by long liquidation with limited short-selling interest, the 59% reduction in the platinum long was driven by both long liquidation and increased short-seller participation. Copper’s week-long buying streak also paused as prices retraced lower, leading to a one-third reduction in the net long.
All but two of the 15 agricultural commodities tracked in this saw net selling, with selling spread across all three sub-sectors of grains, softs, and livestock. This occurred during a week that saw the BCOM Agriculture index suffer a near 4% setback, led by grains where selling of corn and wheat was the most noticeable. Elsewhere, sugar bucked the trend after a massive amount of short covering saw the net flip back to a 51k contract net long, while cocoa’s roller-coaster price action triggered a 39% reduction in the long in response to a weekly price slump of 16%.
What is the Commitments of Traders report?
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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:
- 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
Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.
Recent commodity articles:
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
31 Jan 2025: Commodities weekly: Strong January led by precious metals
29 Jan 2025: Agriculture sector rally led by coffee, corn and cattle
27 Jan 2025: COT Report: Commodity buying extends to fourth week
24 Jan 2025: Commodities weekly: Trump tariff threats and energy agenda in focus
23 Jan 2025: Crude oil weakens amid tariff uncertainty
22 Jan 2025: Gold and silver see fresh gains as Trump 2.0 era begins
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
20 Dec 2024: Silver's resurgence in 2024: A precious metal with an industrial edge
17 Dec 2024: Investors cash in: Gold and silver see year-end profit taking
17 Dec 2024: Podcast: A wild ride in 2025 awaits
16 Dec 2024: COT Report: Agriculture in demand; Traders lift bets against the euro
13 Dec 2024: Commodities weekly: The forward curve and impact on returns
10 Dec 2024: Brazil's coffee crisis pushes Arabica to all-time high
9 Dec 2024: COT Report: Speculators bought crude and gold: euro shorts reach 4-year peak
6 Dec 2024: Commodities weekly: Copper rises on China optimism; OPEC delay signals crude weakness
3 Dec 2024: COT: Mixed week in commodities as dollar buying continued
Podcasts that include commodities focus:
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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