• 4 minutes Energy Armageddon
  • 6 minutes "How to Calculate Your Individual ESG Score to ensure that your Digital ID 'benefits' and money are accessible"
  • 12 minutes "Europe’s Energy Crisis Has Ended Its Era Of Abundance" by Irina Slav
  • 5 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 6 hours Is Europe heading for winter of discontent with extensive gas shortages?
  • 2 days "False Flag Planted In Nord Stream Pipeline, GFANZ, Gore, Carney, Net Zero, U.S. Banks, Fake Meat, and more" - NEWS in 28 minutes
  • 4 days ""Green" Energy Is a Scam. It Isn't MEANT to Work." - By James Corbett of The Corbett Report
  • 2 days Wind droughts
  • 10 hours "Natural Gas Price Fundamental Daily Forecast – Grinding Toward Summer Highs Despite Huge Short Interest" by James Hyerczyk & REUTERS on NatGas
  • 10 days Kazakhstan Is Defying Russia and Has the Support of China. China is Using Russia's Weakness to Expand Its Own Influence.
  • 2 days Australian power prices go insane
  • 5 days Xi Is Set To Be Re-Elected As China’s Leader
  • 14 hours "Dodgy Demand Data? The Oil Price Collapse Conspiracy" by Alex Kimani
  • 3 days Europeans and Americans are beginning to see the results of depending on renewables.
  • 4 days 87,000 new IRS agents, higher taxes, and a massive green energy slush fund... "Here Are The Winners And Losers In The 'Inflation Reduction Act'"-ZeroHedge
  • 1 day Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
Oil Prices Are About To Reverse Course

Oil Prices Are About To Reverse Course

Crude prices have fallen below…

Oil Prices Could Be Set For Another Sharp Rise

Oil Prices Could Be Set For Another Sharp Rise

Bullish and bearish catalysts are…

Major Commodity Trader Sees Looming Oil Price Spikes

Major Commodity Trader Sees Looming Oil Price Spikes

Despite the weakness in paper…

ZeroHedge

ZeroHedge

The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Premium Content

Goldman Sachs Banked A Billion Dollars On The Oil Price Crash

Back in late March, Goldman stunned commodity traders when its energy strategist Jeffrey Currie predicted that landlocked oil (such as WTI, and unlike Brent) could trade negative in the very near future as a result of the massive demand plunge in oil and gasoline consumption resulting from the coronavirus shutdowns coupled with the supply surge unleashed by Saudi Arabia as part of its brief market-share war with Russia. This forecast was impressive for two reasons: just 20 days later, the prompt WTI contract indeed plunged into negative territory for the first time ever as those who were set to receive delivery of WTI barrels had no space to store it and ending paying buyers to take it off their hands, sending the price of the maturing contract to as low as negative $40. The second reason is that Goldman's trading desk actually took Goldman's advice and prepared for oil to crater.

As a result, while countless (most retail) traders suffered massive losses as oil plunged from $15 to -$40 in one session, Goldman made a killing. According to Bloomberg, Goldman's commodities desk generated more than $1 billion in revenue this year through May, benefitting from oil's wild swings for its best start in a decade.

The unprecedented mayhem in oil markets sent crude plunging below zero, left corporate risk managers scrambling and forced retail investors to unwind bets. But it presented an opportunity for Wall Street traders to score big gains. The windfall is a redemption for the unit, which less than two years ago faced an uncertain future under new boss David Solomon, who frowned upon a business that wasn’t making enough money.

Related: Will Canadian Oil See Any Federal Help?

As Bloomberg adds, much of the boost came from oil trading overseen by Anthony Dewell and Qin Xiao, "who correctly positioned their desks for the collapse in prices" by which Bloomberg means they actually read and traded on Goldman's own in house research - which is traditionally meant to lure clients to take positions opposite to the house's own prop positions but in this case actually was spot on - such as this report from March 30 which laid out precisely what would happen.

(Click to enlarge)

As Bloomberg further details, the bank's early gains from that turmoil were under Xiao:

The Singapore-based partner, known as QX to colleagues, oversees the commodities business in Asia. Even as stocks ticked toward record highs, Xiao anticipated the risk of an economic meltdown. It soon came to pass as the pandemic took hold in Asia and went global. He was positioned accordingly for oil and a variety of related products as prices slumped by two-thirds in the first quarter.

Dewell, as Xiao’s London-based counterpart, ran trades that correctly anticipated a collapse in the WTI futures market in April as storage tanks filled and prices spiraled toward zero. That move prompted a wave of forced selling from investor products such as exchange-traded funds that weren’t designed with the possibility of negative prices in mind.

The blockbuster trade was reminiscent of an era a decade ago when Goldman's commodity unit generated annual revenue of around $3 billion. But it later fell out of favor as those earnings slumped, and it even faced the risk of getting dismantled as Solomon’s team took over and questioned its necessity. Ultimately, the new management backed off, and instead carried out modest cuts and publicly affirmed support for the division. Considering the $1 billion return on that decision, DJ-Sol may want to reconsider if scrapping what was once Wall Street's most respected trading desk and replacing it with a credit card and loan business for subprime Americans is really what Goldman wants to be remembered for.

By Zerohedge.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News