Goldman Sachs is considered one of the best institutions that benefited from the oil price crash crisis, thanks to the correct future reading of the markets Crude oil trading With deep analytical insight and good preparation, Goldman Sachs' commodities desk generated more than $1 billion in revenue during the first five months of the year, its best start in a decade. Following the collapse of oil prices, specifically at the end of March, the head of the international commodities research department at Goldman Sachs, Jeffrey Currie, expected that oil prices would reach the negative zone in the very short term. He attributed his expectations to the sharp decline in oil consumption rates as a result of the widespread closures that took place. The countries of the world have banned travel and flights, and sharply reduced trade exchange between countries, in their attempts to limit the spread of the Corona virus pandemic, in addition to the large supply due to the short price war launched by the Kingdom of Saudi Arabia with Russia. After only 20 days, Jeffrey Currie's prophecy was fulfilled, and West Texas Intermediate crude futures (for May delivery) fell into the negative zone for the first time in history, at about -37 dollars per barrel, which astonished everyone and impressed investors due to the correct expectations, in addition to the fact that Goldman's trading desk took expectations seriously and prepared for them well, which helped deliver those huge returns. Cautious outlook for Goldman Sachs Since the global financial crisis in 2008-2009, investments have moved away Goldman Sachs Commodities sector due to its weak profits compared to its high costs, in addition to stricter regulation of investment banks entering into deals. But at the beginning of 2020, the situation appears to be completely different, as the bank’s international commodities division achieved huge returns, benefiting from the collapse in oil prices during the months of March and April. Goldman Sachs's net revenues during the first quarter of 2020 amounted to about $2.97 billion from the fixed income, currencies and commodities division, recording the highest quarterly performance in five years. Goldman Sachs expects that oil prices will return to the bear market again and that the sudden rise in prices will end, pointing to the decline of Brent crude to a price of $35 per barrel compared to its current price above the level of $40 per barrel. The bank said that the decline in refining margins to unprecedented low levels and the recovery Moderate demand rates will support a decline in prices in the long term, and the return of American and Libyan production will put pressure on prices, which will harm the already faltering global economy. Oil prices collapse and lose more than half of their value The oil markets faced a difficult crisis, the largest in its history. Within about three months, oil prices plunged from approximately $60 per barrel to less than $20, which was considered a devastating disaster. The markets were subjected to double pressure and witnessed the largest decline in demand rates in the modern era, simultaneously With the price war waged by Saudi Arabia and Russia. After the conditions in the market worsened due to the struggles of major producers amid a real crisis in demand rates as a result of the Corona virus, the oil market faced another third crisis in a short time, which is the depletion of storage capacity. Demand rates are collapsing, supply rates are facing a glut, and places to store oil are running out, forcing investors to sell it at a negative price. Futures market. Demand rates collapse and the market is flooded with cheap oil The Corona virus pandemic has afflicted the world with a state of complete paralysis and caused chaos in the oil markets, as global demand rates fell at a relentless pace, losing more than 30 million barrels per day. The biggest factor for this loss was the widespread closures and bans on movement, travel, and flights taken by countries around the world. To limit the spread of the virus, this increased investors’ concerns about the economic consequences of the Corona virus, which may be devastating to the global economy, which affected oil prices, which took a downward curve at a rapid pace. The OPEC Plus alliance called for a deeper reduction in production levels as a means of supporting oil prices and working to restore balance in the market, but Russia refused to participate, and instead of reducing production levels, the Kingdom of Saudi Arabia announced an increase in its production levels and flooded the market with cheap oil, sinking oil prices by more than half their value and trading at Approximately $25 per barrel from levels at the beginning of the year above the price of $60, which shocked many. At a time when the world is fiercely facing the Corona virus epidemic, Saudi Arabia and Russia are igniting an oil price war between them. The OPEC Plus agreement did not sufficiently support prices Tensions subsided after OPEC Plus Meeting On April 9, Saudi Arabia and Russia concluded a historic agreement to reduce production levels by 9.7 million barrels per day under the auspices of the United States. In theory, the reduction levels seem large given global consumption, which amounts to 100 million barrels per day, but in light of the Corona crisis and the steady decline in demand rates, the effect of this reduction is no longer tangible and noticeable, as oil prices are still continuing to decline, which reflects that these reductions are not sufficient. Enough to reduce the wide gap between demand and supply. On April 20, West Texas Intermediate crude futures (May delivery) fell from $17.85 to -$37.63 per barrel, losing more than 300%, recording the largest daily fall for American crude in history, due to the state of panic that gripped investors about how they would receive the physical barrels. of oil when storage sites reach
A professional technical and economic analyst in global financial markets since 2004. He holds a Master’s in Business Administration from the American University in Cairo. He works as an economic writer and technical analyst for many international financial companies. He writes daily economic and technical analyzes for many Arabic and English websites specialized in the field of stock exchanges and financial markets.
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