Oil rout makes Goldman Sachs review commodities division

Goldman Sachs is reviewing its massive commodities investment business after a weak start to 2017, according to reports.

The board of the US investment bank discussed the division’s performance last week, according to Bloomberg, who cited people with knowledge of the discussions.

The bank’s global co-head of the securities division at the bank, Isabelle Ealet, will lead an informal review, the reports said. Ealet was formerly the bank’s global head of commodities, and now reports to the chief executive, Lloyd Blankfein.

Goldman’s board met last week in London for an annual meeting to discuss overall performance after a first quarter in which the bank was the only of the top six US banks to report lacklustre earnings.

A spokesperson for the bank said: "Commodities has been and still is an important business for our clients and we will continue to invest in it to ensure we are best meeting their needs.”

Commodities trading has previously been a lucrative arm for Goldman, but the worst first half of the year since 1998 for Brent crude oil has contributed to a torrid time for oil investors around the world.

In January Jeff Currie, head of commodities research for the bank, said falling inventories in oil would lead to oil trading as highs as $60 per barrel this year. However, Goldman last week lowered its short-term forecasts for West Texas Intermediate (WTI) crude, the North American benchmark, to $47.50 per barrel.

A March filing to US regulators showed commodities assets of $3.6bn in the first quarter of 2017, down from $5.7bn in December.

In his annual letter to shareholders last year chief executive Blankfein said the bank “remained committed” to trading despite “cyclical pressures”. He weighed up the “balance between cutting costs and investing in businesses until the cycle fully turns”.

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