The month of January is a crucial time for investors and traders alike, as the Bloomberg Commodity Index (BCOM) undergoes its annual rebalancing. This event often leads to significant material flows in the underlying futures contracts, and Energy Aspect’s quant team has taken a closer look at these movements. In this blog post, we will delve into their findings and provide a comprehensive analysis of the flows during the January BCOM rebalance.

Adjusting for Recent Flows

To begin with, it is important to note that using December 2024 Asset Under Management (AUM) alone may overstate the impact of the BCOM rebalance. To address this, Energy Aspect’s quant team adjusted the headline AUM for recent flows, single-asset BCOM members, and carry-driven relative value positions. This allowed them to obtain a more accurate picture of the material flows during the rebalancing process.

Rebalancing Flows in Crude and Refined Products

The quant team’s modeling revealed that there was approximately 55 million barrels of net buying in crude and refined products during the January BCOM rebalance. The largest OI impact was observed in WTI and RBOB, with around 14,000 lots of buying in each contract. This suggests that investors were eager to add exposure to these markets, which are seen as key drivers of global energy demand.

Precious Metals Selling

In contrast, the quant team found that precious metals saw significant selling during the January BCOM rebalance. Approximately 6,000 lots of gold and 7,000 lots of silver were sold, indicating a reduction in investor appetite for these markets. This could be due to a variety of factors, including changes in interest rates or geopolitical tensions.

Industrial Metals: Aluminium Stands Out

The quant team’s analysis also revealed mixed flows in industrial metals. However, one metal stood out as having significant selling pressure – aluminium. Approximately 2,500 lots were sold during the January BCOM rebalance, indicating that investors were unwinding their positions in this market.

Flows Breakdown Chart

To provide a clearer picture of the material flows during the January BCOM rebalance, Energy Aspect’s quant team has provided a breakdown chart (seen above). This chart highlights the significant buying pressure in crude and refined products, as well as the selling pressure in precious metals and industrial metals.