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Goldman Says Wall Street Banks’ Exposure Was Behind Oil Rout

  • Dealers sold futures to cover to producer hedges, bank says
  • Mexico’s annual oil hedge has helped roil the market before
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Phil Streible, senior market strategist at RJO Futures, examines volatility in the oil and natural gas markets.Source: Bloomberg)
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Wall Street’s been abuzz about -- and confused by -- Tuesday’s epic plunge in the oil market. Any number of theories are flying around. But analysts at Goldman Sachs Group think they’ve uncovered one of the actual main culprits: a rush by Wall Street banks to cover their exposure to oil producers’ hedges.

U.S. oil prices plunged 7.1 percent on Tuesday, the most in three years, before recovering on Wednesday.