COT Report: Speculators sell dollar, buy crude ahead of Middle East escalation

Broad commodity buying ahead of Middle East escalation

In the week to June 10, managed money accounts showed broad-based demand across commodities, with net buying recorded in all major sectors except softs. The most notable positioning shifts occurred in the energy space, as speculative appetite was buoyed by tightening fundamentals and early signs of improving risk sentiment following renewed optimism around a potential US-China trade deal, which helped ease macroeconomic and demand concerns.

The standout move came in crude oil, where speculators added aggressively to net long positions, driving the combined Brent and WTI long to a ten-week high of 319,000 contracts. This was primarily driven by a combination of fresh longs in Brent and the reduction of gross short positions in WTI, as the market entered the peak summer demand period amid signs of tightening supply.

Importantly, this shift in positioning occurred before last Friday’s dramatic escalation in the Middle East, when Israel launched strikes on Iranian nuclear facilities and senior military targets, triggering a near-13% intraday spike. Crude settled 7% higher on Friday, only to spike again in early Monday trade as hostilities between Israel and Iran continued.

However, the absence of direct strikes on oil infrastructure or export facilities, combined with a failure to surpass Friday’s price peaks—Brent at USD 78.50 and WTI at USD 77.60—invited profit-taking and hedging flows from producers. Still, the unfolding conflict presents a binary risk scenario: uninterrupted flows could trigger a sharp $10 correction, while any disruption to Iranian exports or a worst-case scenario blockade of the Strait of Hormuz could send prices soaring. For now, prices are drifting lower into Monday’s session, with current levels only justified if actual supply disruption materialises.

In precious metals, gold saw modest long liquidation, while silver attracted fresh buying. The standout was platinum, where net long positions jumped alongside a 13% price surge—driven by technical momentum and an outlook pointing to tightening market condition.

In agriculture, soybeans found renewed support amid optimism around Chinese demand, while short covering helped reduce an extended net short in wheat. Corn, however, continued to face selling pressure amid a persistently bearish supply outlook. The softs sector was the only area to buck the trend, with sugar shorts doubling on weakening fundamentals and technical breakdowns. In contrast, the livestock sector remained in favour, with broad-based buying led by hogs as supply concerns and firm seasonal demand supported bullish sentiment.

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.