Article / 10 October 2016 at 7:51 GMT

COT: Big shift from precious metals to energy — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Bullish bets on oil rose while for gold they sank
  • WTI gross-long hit highest level since July 2014
  • Further gold long-liquidation possible if $1,250 level breaks
Bullish oil bets took flight on the Opec deal. Pic: iStock 

By Ole Hansen

Hedge funds maintained an almost unchanged bullish exposure to commodities during the week ending October 4. But behind that number some major shifts took place. Not least from precious metals to oil following the Opec agreement to cut production and gold’s key technical break below $1300/oz. 

Speculative positioning in Commodities
Bullish bets on WTI crude oil jumped 40% or 73,051 lots to the 254,503 lots, the highest reading since May 2015. The gross-long at 353,162 lots is the highest level seen since July 2014, just before the selloff began. The gross-short declined by 30% to 98,659 below the two-year average of 112,000 lots. 

Speculative positioning in WTI Crude oil
With the open interest on WTI crude oil hitting a fresh record following October 4 we can assume that the buying had continued up until last Thursday when WTI crude oil broke above $50/b. This has once again left the market vulnerable to negative news, especially from Opec producers such as Iraq which over the weekend stated that it was looking to increase production further in 2017.

Last week the US oil rig count rose to an 8-month high after drillers added rigs for a sixth straight week. A strong rally carries the risk of self defeat as the market focus could shift to returning barrels from non-Opec producers, such as those in North America. Following the Opec deal oil for delivery in both 2017 and 2018 returned to levels last seen in June. This helped trigger a pick-up in US producer hedging with the gross-short among the producer merchant category rising to a new record during the above mentioned reporting week. 

Oil producer gross short
Gold selling accelerated once the key technical area of $1,300/oz was broken on October 4, the day that data for this report was compiled. It resulted in the net-long being cut by 22% primarily due to long-liquidation. The net-long has now been cut 82,000 lots or 29% since hitting a record on July 7. At 205,000 lots however it remains more than 30% above the low point witnessed following the May selloff. This could indicate some additional long-liquidation, especially if $1,250/oz fails to provide support this week.

Speculative positioning in COMEX Gold futures
With an additional 20,000 lots sold funds continued to add to an already record short position in CBOT wheat. The contract has been range-bound between $3.9 and $4.11 for the past six weeks with a break higher likely to trigger buy stops as short positions are being reduced.
Speculative positioning in CBOT Wheat

– Edited by Clare MacCarthy


Ole Hansen is head of commodity strategy at Saxo Bank

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Commitments of Traders: Commodities

10 October
John Roberti John Roberti
dear Ole, oil news are not favouring oil price upside with baker Hughes rigs count at highest level since long time and Soviet declaration of problems with Saudi Arabia on oil deal! You indicated last week that if prices would reach 48, they could then reach 45 or 43. are you still of this opinion today?
10 October
Ole Hansen Ole Hansen
Hi John, A floor is likely to have been created by Opec's decision. The weakness seen from any short term disappointments all depends on the size of the speculative long that need to be reduced should such a situation occur. I do not see a correction much beyond $48 at this stage (Brent crude)
10 October
Ole Hansen Ole Hansen
COT data on Brent crude oil just in.
Funds increased bullish Brent crude oil bets by 24% to 358,699 lots in the week to Oct. 4. The combined buying of Brent and WTI crude oil futures hit a record 141,582 lots.
11 October
AndrejLences AndrejLences
Please Ole. I am in the Natgas trade via futures, you wrote the article here,. I am holding position still with profit. Now there is some retracement or maybe daily cycle top. I am thinkig about taking profit now. Whats your opinion ?
18 October
chops77 chops77
Hey Ole , did you stop publishing the COT Report. Can not find new weeks report
Ole Hansen Ole Hansen
Hi Chops77. I've been traveling but will add a few charts shortly.


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