COT: Crude long cut to a 12-year low; Dollar short more than doubling COT: Crude long cut to a 12-year low; Dollar short more than doubling COT: Crude long cut to a 12-year low; Dollar short more than doubling

COT: Crude long cut to a 12-year low; Dollar short more than doubling

Ole Hansen

Head of Commodity Strategy

Key points:

  • Positions and changes made by speculators in commodities and forex in the week to Septermber 3
  • Dollar short position more than doubles despite some emerging greenback strength
  • Crude oil net long slumps to a 12-year low amid demand worries and technical selling
  • Metals see broad long liquidation led by gold and silver
  • A strong week of grains buying still leaves the most bearish-ever view for this time of year

Forex:

The Bloomberg Dollar Index, which tracks the greenback's performance against a broad basket of major currencies, rose 1% in the week to 3 September. Despite this, speculators nevertheless accelerated their dollar selling against the currencies tracked in this update, highlighting an often delayed reaction in positioning relative to price. The dollar short against eight IMM futures more than doubled to USD 16.2 billion, a 13-month high, with the pace of selling seen during the past three weeks being the most aggressive since March 2020, when the global pandemic temporarily hurt global growth.

The change was primarily driven by the CAD, where short-covering reduced the net short by 38% to 68.5k contracts. Speculators also added to length in GBP and EUR, while the JPY net long jumped 59% to 41k contracts, nearing the January 2021 peak of 50.5k contracts.

Non-commercial IMM futures positions versus the dollar in week to September 3

Commodities:

Worries that the current weak demand outlook in China may spread to the rest of the world was the overriding focus during the reporting week to 3 September, when the Bloomberg Commodity Index suffered a 2% setback, primarily driven by weakness across the growth-dependent sectors of energy and industrial metals. In addition, a stronger dollar helped trigger profit-taking across precious metals, leading to the biggest—albeit still relatively small—reduction in the elevated gold long.

A near 7% slump in crude through technical support levels triggered a combination of long liquidation and fresh short selling, which overall left the combined net long in WTI and Brent at the lowest level in 12 years. Recent and persistent weakness across the refined fuel market helped drive an increase in the net short position in the London and New York diesel futures. Combining the five major crude and fuel contracts, the net long of these fell to the lowest level since 2011, when the ICE Exchange started to collect Brent and gas oil data.

Elsewhere, gold, as mentioned, suffered a small reduction while sellers attacked platinum to flip their net position back to a short. Three weeks of tentative copper buying saw a partial reversal as the High Grade futures price slumped by 5%.

The agriculture sector, meanwhile, saw net buying, driven by the grains sector following another week of sizable short-covering across all the major U.S. grain and oilseed futures. However, despite a 38% reduction from the July record short, the net short across the three major contracts was still a record for this time of year. Elsewhere, a second week of strong sugar buying helped lift the net long to a five-month high.

Managed money long, short and net commodities positions in the week to September 3
Energy: The WTI and Brent combined net long slumped to a 12-year low as the gross short exceeded 205k contracts for only the third time since 2020. The gas oil (diesel) net short hit an eight-year high.
Metals: Broad selling led by gold and silver, with the platinum position flipping back to a net short, while three weeks of copper buying reversed as the price slumped 5%.
Grains: Broad buying continued, forcing another week of short covering, especially in corn and soybeans. Overall, the net short in the three major crop futures was still the most bearish ever for this time of year.
Softs: Sugar and cotton remained in demand, while cocoa and coffee saw a small amount of long liquidation.

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:

5 Sept 2024: Can gold overcome the 'September curse'?
4 Sept 2024: 
Wheat rises on European crop worries
3 Sept 2024: 
Chinese economic woes drag down crude oil and copper
2 Sept 2024: 
COT: Commodities see broad demand as the USD slumps to a net short
30 Aug 2024: 
Commodities sector eyes fourth weekly gain amid softer dollar and Fed expectations
27 Aug 2024: 
Month-long sugar slide pauses amid concerns of Brazil's supply
27 Aug 2024: 
Libya supply disruptions propel crude prices higher
26 Aug 2024: 
COT: Funds boost metals investment as dollar long positions halve amid weakness
23 Aug 2024: 
Commodities Weekly: Metal strength counterbalancing energy and grains
22 Aug 2024:
 Persistent supply contraints keep cocoa prices elevated
21 Aug 2024: 
Weak demand focus steers crude towards key support
19 Aug 2024: 
Resilient gold bulls drive price to fresh record above USD 2500
19 Aug 2024: 
COT Buyers return to crude as gold stays strong; Historic yen buying
16 Aug 2024: 
Commodities weekly: Gold strong as China weakness drags on other markets
9 Aug 2024: 
Commodities weekly: Calm returns to markets, including raw materials
8 Aug 2024: 
Sentiment-driven crude sell-off eases, allowing traders to focus on supply risks
7 Aug 2024: 
Limited short-selling interest observed during copper's recent aggressive correction
6 Aug 2024: 
Video: What factors are fueling the current market turmoil and gold's response
5 Aug 2024: 
COT: Broad commodities sell-off gains momentum; Forex traders seek JPY and CHF
5 Aug 2024: 
Commodities: Position reduction in focus as volatility spikes
2 Aug 2024: 
Widespread commodities decline in July, with gold as the notable exception

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.