Open Interest Analysis: Commodities

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The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on Tuesday June 11th.

Here are the weekly charts of each major futures commodity with commentary on open interest and large trader trends.


WTI Crude Oil:

WTI Crude Oil open interest has weakened recently after coming back higher in March and April that pushed above the 10-Week Moving Average for multiple weeks. The large trader positions have been recently cutting back sharply on their net positions (Specs bullish, Commercials bearish).

Right now, this market is seeing lower prices, lower trader positions and a lower OI level. This suggests a downward bias.


Brent Crude Oil:

Brent Oil open interest remains strong and shot to a new all-time record high reading a few weeks ago. Large traders positions remain in extreme positions with Commercials being bullish and Specs the opposite.

Prices have started to turn around and have been heading lower in the past weeks as global growth concerns weigh on the oil price.


Heating Oil:

Heating oil open interest has popped a bit in recent data and remains a little above the 10-Week MA. Heating oil prices have been dropping recently with the other forms of oil.

Large traders are in extreme positions relative to their 3-Year levels with Speculators betting against a rise in prices. The Commercials now have a small bullish net position in Heating Oil. This has been a rare occurrence and has basically only happened about a few times over the last three years as the Comms are usually betting much more heavily bearish.

OI Analysis would characterize this market as a strengthening downtrend as OI is showing signs of strength in the past month or so with declining prices.


Gasoline:

Gasoline open interest has dropped sharply below the Moving Average in recent weeks. The gasoline price had risen rather strongly since its late-2018 declines and had been helped along by some outside factors like floods in the USA mid-west, annual refinery rotations and higher crude oil prices. The Gasoline price has now followed crude oil lower and large traders have retreated from their extreme positions.

OI Analysis would characterize this market as a weak uptrend (coming undone) as OI has been relatively low compared to where prices had gone.


Natural Gas:

Natural gas open interest has continued higher in the latest data and has continued to remain above the 10-Week Moving Average after dropping sharply from its peak in the second half of 2018. Large traders positions have been seeing rising bearish bets from the Specs and bullish bets from the Commercials that are close to extreme of their 3-year range.

Lower price trend in combination with a rise in OI is typical of a strengthening bear trend.


Gold:

Gold OI levels have been rising in the recent data and remain above the 10-Week MA. The gold price has been highly correlated with the Speculator positioning in the past few months, seemingly in lockstep. This week saw another gain in Speculator positions after a record one-week gain on June 4th. The large trader positions remain in modest levels and have see-sawed over the past few months but have yet to get firm traction.

We will likely need to see continued growing trader participation (OI) for gold to sustain higher levels moving forward.


Silver:

Silver open interest has gone higher recently following a sharp decline on April 30th and after hitting a short-term peak a few of weeks before that. The market price has been trending lower since hitting approximately $16 in February.

Speculator positions had dipped into bearish territory again on May 14th but pulled into a small bullish level on June 11th.

OI Analysis would suggest that rising OI with falling prices means that a healthy or strengthening bear market is in place.


Copper:

Copper open interest levels have been rising recently and are now in a high OI level above the 10-Week MA.

The large trader positions have now pushed into extreme positions with Specs in bearish territory and Comms in bullish positions. The Copper price has also taken a downturn which took a while but did eventually follow the spec position lower.

The gains in open interest have now been accompanied with lower Copper prices which is against the historical correlations.


Platinum:

Platinum open interest has been on the rise in recent weeks while prices have been trending lower, suggesting a strengthening downtrend. Large traders positions have continued to retreat from their recent cycle highs.

The Specs are bullish and Commercials are bearish but less so over the past weeks. OI up with prices down suggests more bearish trends could continue.


Palladium:

Palladium open interest continues to plummet. Palladium prices had been shooting through the roof over the past three years and reached record highs in early 2019.

The last leg of this boom (since summer 2018) did not have high OI or extreme Speculative betting which suggested a weakening of the trend (which happened after record highs). We have seen a strong rebound of prices in June but can it continue without more open interest and higher Spec betting?


Coffee:

Coffee open interest has come off sharply from the all-time high levels of past weeks and is now below the 10-Week Moving Average. The OI level helped fuel this trending market as coffee prices have continued lower (lowest since 2005). Large supplies of coffee out of Brazil and Vietnam have taken a toll on the coffee price in the last two years.

Currently, Specs and Commercials have come off their strong positioning levels, perhaps signaling that this market is getting ripe for a turnaround. Prices have started to show signs of life to the upside in recent weeks.


Corn:

Corn open interest has been going higher in recent weeks and prices have stared gaining due to crop issues this year.

The large traders came out of their extreme positions and reversed themselves in the last couple of weeks. Commercials have now gone net bearish (and extreme) while Specs have turned bullish on this commodity.


Soybeans:

Soybeans open interest has edged lower in recent data. OI had risen to the highest levels since the second half of 2018 in the past few months before faltering. Large traders remain right on the borderline of extreme positions with Specs betting on a further decline while Commercials are buying on price weakness.

This market has and will probably be affected by the news headlines and the current trade war rhetoric as much as anything else in the short term. OI Analysis would suggest a healthy bear market is in place with a bear trend (coming undone?) and a rising (coming undone?) OI trend.


Sugar:

Sugar open interest has been dipping in the recent data after a strong spike higher. The large trader positions remain in extreme levels with Commercials being bullish and Specs being bearish.

The OI cool off and a decline in the extreme positions suggests the bearish trend could be ripe for a turn.


Wheat:

Wheat open interest dropped again in the latest data and further under the 10-Week Moving Average. The large trader positioning has retreated over the past few weeks and as can be seen from the charts as well as the statistics: wheat has been highly correlated to the Speculator positions.

A dip in the OI as prices rise suggests the greater market is more interested in the downside and less interested in prices rising. This market is not showing high OI or extreme positioning which means it is somewhat neutral at the moment.


*COT Report: The weekly commitment of traders report summarizes the total trader positions for open contracts in the futures trading markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (speculators & large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators).
The Commitment of Traders report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions data that was reported as of the previous Tuesday (3 days behind).

All information and opinions on this website are for general informational purposes only and do not constitute investment advice.

Article by CountingPips Research

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