Article / 02 October 2017 at 8:05 GMT

COT: Continued rotation out of metals into energy – #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Unchanged commodities exposure of 1.7 million lots in week to September 26
  • Rotation out of metals into energy continued but bullish bets look stretched
  • Brent crude the most exposed, especially after last week’s jump in US crude exports
  • Gold and silver were both sold for a second week in response to September reversal
  • Agri sector was mixed with soybeans and wheat seeing strong buying
gold and silver
 The great rotation out of metals and into energy continues. Photo: Shutterstock.

By Ole Hansen

Hedge funds maintained an unchanged commodities exposure of 1.7 million lots in the week to September 26. Most noticeably was the continued rotation out of metals into energy where bullish bet looks increasingly stretched. 

Speculative positioning in Commodities
Bullish bets on the energy sector look increasingly stretched with most apart from WTI reaching year or even record highs. Brent crude is currently the most exposed, not least following last week’s jump in US crude exports. Additional supply to the global market could see both Brent’s backwardation and premium to WTI being reduced. The net-long in WTI crude oil jumped by 43,500 lots but from a lower base and it left the net-long at 61% of the February record.

NB: I have added Brent traded on CME in this week’s table. This contract (ticker: BZ) copies the big Brent traded on ICE and is a popular for spread trading. The record short of 26k lots could indicate a pickup in the short selling of the Brent/WTI spread. 

COT: Brent Crude oil
Lower refinery margins as witnessed last week may also spell trouble for the combined record long currently held in the refined product futures of gas oil, ULSD and RBOB.

COT: Refined product futures
Gold and silver were both sold for a second week in response to the sharp reversal witnessed during September. Having retraced 50% of the July to September rally gold need to find support ahead of $1260 in order to avoid accelerated long liquidation. Traders remain torn between focusing on US rate hikes and Trumpflation against continued and elevated geo-risks.  

COT: Metals

The agriculture sector was mixed with soybeans and wheat seeing strong buying. Funds remain net-short the grains sector amid rising stocks. The International Grain Council expecting this year’s global crop to be the second largest on record.

COT: Grains and soybeans
Soft commodities:

– Edited by Clare MacCarthy


Ole Hansen is head of commodity strategy at Saxo Bank

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Commitments of Traders: Commodities

Hi Ole,

Interesting what you mention regarding Brent (BZ) at CME as well as Brent/WTI spread. Perhaps you could include this and inform a little about the possibilities for commodity spread trading during your next commodity seminar on 19. Oct.?


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