Building a commodity watchlist and research routine

What you will learn

• How to choose a focused watchlist and write driver cards
• Which data releases belong in your calendar, with German times
• How to read the CFTC Commitments of Traders report and calculate a range position
• How to calculate a 3-2-1 crack spread

Explanation

This lesson turns the course into a routine. The aim is not to predict prices but to know what drives each market you follow and what would change your view.

1. Choose 6–10 markets

Fewer markets, followed well, beat a long list. Pick from each group: energy (Brent or WTI, natural gas or TTF), metals (copper, gold), agriculture (wheat or corn, one soft commodity).

2. Write a driver card for each market

• Main drivers: three to five, from lessons 2–5.
• Key reports and dates (lesson 6).
• Seasonality: heating season, driving season, harvest.
• Curve shape: contango or backwardation (lesson 7).
• Positioning: latest Commitments of Traders data (below).
• A spread: for example Brent minus WTI, or the crack spread.
• Two if-then scenarios with price levels, written before the event.

3. The data calendar

The US and the EU switch daylight saving time on different dates, so for a few weeks each spring and autumn US releases arrive one hour earlier in Germany. Holidays also move release days; check the official calendars.

4. Positioning: the Commitments of Traders report

The US Commodity Futures Trading Commission (CFTC) publishes each Friday the positions held on the previous Tuesday. The disaggregated report splits traders into producers and merchants, swap dealers, managed money (mainly hedge funds and commodity trading advisers) and other reportables. Watch the managed-money net position (long minus short) and where it sits in its range:

Range position = (current net − lowest net) ÷ (highest net − lowest net)

Use the last three years. Near 100% means speculators are already heavily long, so bad news can trigger fast selling; near 0% is the opposite. This is context, not a timing signal: crowded positions can stay crowded for months.

5. Spreads as indicators

The 3-2-1 crack spread estimates refinery margins: three barrels of crude become roughly two barrels of gasoline and one barrel of diesel or heating oil. US product futures are quoted in dollars per gallon; one barrel is 42 gallons.

Crack spread per barrel = (2 × gasoline × 42 + 1 × diesel × 42 − 3 × crude) ÷ 3

A high crack spread means refiners earn well and tend to buy more crude; a falling one can signal weak fuel demand.

6. The routine

• Daily (10–15 minutes): check prices against scenario levels; note news that touches a main driver.
• Weekly (about 60 minutes, for example Saturday): update inventories, COT range positions, curve shapes and spreads; rewrite scenarios.
• Monthly: read the monthly reports; check that driver cards still fit; note what you got wrong.

Worked example

Hypothetical example, part 1: crack spread. Crude $75 per barrel, gasoline $2.30 per gallon, diesel $2.60 per gallon.

1. Gasoline: 2 × $2.30 × 42 = $193.20.
2. Diesel: 1 × $2.60 × 42 = $109.20.
3. Crude cost: 3 × $75 = $225.00.
4. Crack spread: ($193.20 + $109.20 − $225.00) ÷ 3 = $77.40 ÷ 3 = $25.80 per barrel.

Part 2: COT range position. Managed money in crude oil holds 220,000 long and 80,000 short contracts. Over three years, the net position ranged from −20,000 to +260,000.

1. Net: 220,000 − 80,000 = 140,000.
2. Range position: (140,000 − (−20,000)) ÷ (260,000 − (−20,000)) = 160,000 ÷ 280,000 = 57%.

Interpretation: positioning is mid-range, neither a warning nor a support. Refinery costs, transport and taxes are excluded.

Common mistake

Practice activity

Write a driver card for copper (on paper). Then use this hypothetical data: managed money holds 95,000 long and 35,000 short contracts; the three-year net range is −40,000 to +90,000.

Tasks: (1) List at least four main drivers and two reports or data sources for copper. (2) Calculate the range position. (3) Write one if-then scenario.

Limitations: Range positions depend on the chosen period, and COT data does not include all market participants or over-the-counter trades.

Key takeaways

• Follow 6–10 markets with a one-page driver card each.
• Build a calendar of weekly and monthly releases and check daylight-saving and holiday shifts.
• Use COT range position and spreads such as the crack spread as context, not as timing signals.
• End every weekly review with updated, written if-then scenarios.

Next step

You have completed this course; continue with the course "Bonds & Fixed Income in Depth" to learn how interest rates, yields and credit shape the other big part of global markets.