Oil prices soared Thursday in the wake of reports that major oil producers have agreed to keep their supply cuts intact through next month.
OPEC and its allies had been discussing whether or not to restore as much as 1.5 million barrels a day of oil production. The group ultimately decided that it will leave output at current levels, according to a Bloomberg report.
Saudi Arabia, meanwhile, committed to extend its voluntary cut of 1 million barrels of oil per day. The oil market officials meet via video-conference. The discussion took place at a time when recovery in the oil market is still taking hold after a plunge in demand because of the COVID-19 pandemic.
Prices for Brent crude, the international benchmark, jumped as much as 5.3% to an intraday high of $67.47, with the gain later trimmed to 4.7%.
The decision by OPEC+ was “incredibly bullish,” and Saudi Arabia’s decision “was shocking as it leaves them vulnerable to losing market share next month when the oil market is in deficit by a couple million barrels,” said Edward Moya, senior market analyst at Oanda, in a note.
West Texas Intermediate oil futures also popped up as much as 5.3% to an intraday high of $64.51. The continuous contract was later up by 4.6%.
Brent oil should jump 17% from current levels to $75 per barrel this summer, with Goldman Sachs expecting a lag in supply relative to demand to support a further gain in prices.
The Organization of the Petroleum Exporting Countries and its allies next month are poised to agree to boost production but the investment bank said the increase will likely fall short of its demand forecast.
Goldman Sachs now expects Brent to reach $70 in the second quarter and $75 in the third quarter, with each forecast raised by $10 per barrel. The investment bank’s call would represent a 17% upside from Brent’s intraday high of $63.94 in its continuous contract.
The “cross-asset oil outperformance this year remains driven by fundamentals, with better than expected demand and still depressed supply once again creating a larger deficit than even we expected in January and February, and with timespreads strengthening,” said Goldman Sachs in a research note published Monday and led by senior commodity strategist Damien Courvalin.
Brent oil prices have jumped about 23% this year after starting 2021 at nearly $52 per barrel. The vaccination of millions of people worldwide to curb the spread of COVID-19 has bolstered expectations that more businesses will reopen, which in turn brighten the outlook for oil demand.
OPEC next month appears ready to raise its oil production quotas by 500,000 barrels a day beginning in April, with Goldman Sachs saying its base case also includes Saudi Arabia reversing its production cut of 1 million barrels a day, a unilateral move announced in January.
“This remains however well below the 2.4 [million barrels per day] increase in demand we forecast from now to April — with as a result an agreement to hike production not bearish in our view,” said Goldman Sachs. “In fact, these barrels would arrive a month later at destination by which point we expect demand would have risen an additional 0.2 mb/d, further tightening the spot oil market.”
Goldman also said it has seen no signs of higher activity among most non-OPEC+ producers outside of North America, which creates risks that output will fall short of its demand forecasts by 900,000 barrels per day over the coming year.
Global oil demand should reach 100 million barrels a day by late-July, said Goldman Sachs, which would be sooner than its previous forecast for oil to reach that level in August.
For as long as there have been financial markets, there have been market crashes.
The March 2020 market crash – driven by the rapid spread of coronavirus around the world – is just the latest in a long line of panics throughout the hundreds of centuries that have roiled markets, crashed economies, and led to financial ruin for countless people.
Generally driven by investor panic and loss of confidence in the markets, often after a period of excitement and speculation, market panics are features of the financial and economic system around the world.
From the infamous Tulip Panic of the 17th century, to the 2008 financial crisis, Markets Insider decided to round up a handful of the most notable and interesting crashes in market history. Check them out below.
Covid-19 Market Crash, 2020
The novel coronavirus outbreak not only led to a global health crisis, but also the most recent global financial recession beginning on February 20.
Although the biggest impact of the crash was initially felt in China, it quickly spread to the rest of the world as the virus spread, forcing lockdowns and plunging economic activity around the globe.
Markets were initially stunned, and on March 16, the S&P 500 reported its steepest drop since 1987 as many businesses were forced to shut down and travel restrictions were set in place. The market’s reaction was sharp but short-lived, and by June, stocks were back to their pre-crash levels.
As the May futures contract for oil expired, many traders were faced with taking delivery of physical oil, so were forced into panic selling, which in turn pushed the commodity below zero.
In March, oil producers cartel OPEC held discussions to reinforce production cuts amongst allies from 2.1 million barrels per day to 3.6 million bpd and to continue this until the end of 2021.
Russia disagreed and a price war was launched by OPEC’s top trading member Saudi Arabia to fight for a greater market share.
Oil lost almost a third of its value with Brent crude crashing 24% to $33.36 and US oil dropping 34% to $27.34.
China’s Stock Market Crash, 2015
Over three weeks in June 2015, fear of a market seizure and growing financial risks across the country caused chaotic panic selling which erased over $3 trillion in the value of Mainland shares.
Possible triggers of the market crash include a surprise devaluation in the Chinese yuan and a weakened outlook for China’s growth, which then put pressure on emerging economies that relied on China for growth.
The crash’s worst day was on June 12, when the Shanghai stock index lost about a third of its value, while losses were even more pronounced in the smaller Shenzhen Composite.
Known to be the worst crash since the Great Depression, the 2008 financial crisis grew out of deregulation in the financial industry that eventually led to the inflation of an enormous housing bubble.
Like all bubbles, it eventually popped, as housing supply overtook demand and house prices fell, making it difficult for homeowners to meet their mortgage obligations, leading to a wave of defaults
The crisis worsened when investment bank Lehman Brothers — which was highly exposed to the sub-prime market — collapsed. Numerous other lenders were bailed out by governments around the world, and markets crashed, before the global economy spiralled into recession.
With its origins in Thailand, a severe financial crisis struck many Asian countries in late 1997.
Foreign investors were worried that Thailand’s debt was rising too rapidly when Bangkok unpegged its currency from the US dollar, and general confidence evaporated.
Indonesia, South Korea, Hong Kong, Laos, Malaysia, and the Philippines were the most affected countries as currency declines spread rapidly across, and they saw a drop in capital inflows of over $100 billion.
The Asian crisis eventually destabilized the global economy at the end of the 1990s.
The “Roaring 20s” were an age of excess and wild speculation. That all came to an end in September and October 1929, culminating in Black Tuesday, 29 October, when 16 million shares were sold on the NYSE in one day and the market collapsed
On 21st October, panic selling kicked off and by the tragic 29th, prices fully collapsed.
Finance legends like the Rockefeller family and William Durant ventured to correct the market by purchasing large quantities of stocks, but the rapid price drops did not stop.
By 1930, America was in the Great Depression — possibly the most painful crash in recorded history.
It spread well beyond the US, and by 1932, the world’s GDP had contracted around 15%.
On the historic Black Friday, 9 May 1873, unlimited speculation in banks and companies that existed only on paper set off a massive fall in value of shares on the Vienna stock exchange and caused a wave of panic selling.
This marked the beginning of a lesser-known Great Depression that lasted five years and spread across Europe and to the US.
The crash brought economic growth in the Habsburg Monarch to an end, and harshly impacted a group of bankers, some counselors of the imperial court and friends of the Emperor, including the imperial family itself.
The Tulip mania was one of the first recorded financial bubbles, and occurred primarily in the Netherlands between 1634 and 1637.
After tulip bulbs contracted a non-fatal tulip-specific mosaic virus, their prices rose steadily and made the already overpriced flower even more popular and exotic. Tulip bulbs then saw a 20-fold increase in value in just one month.
But as it happens in speculative bubbles, holders eventually began to sell off their tulips to solidify their profits resulting in a doom loop of continuously lower prices. Although it was not a widespread craze, it hurt a handful of buyers in the short-lived luxury market.
More than anything, the tulip bubble crash serves as a lesson for the perils that excessive greed and speculation can lead to.