Historic Day in Commodity Futures

Five years ago today, the commodity futures markets experienced one of the most chaotic days in trading history. The May 2020 West Texas Intermediate (WTI) crude oil contract opened at $17.85, only to witness an unprecedented collapse that shook the trading community to its core.

WTI Prices Plummet

Throughout the day, the WTI futures contract struggled and initially hovered around significant psychological price points like $10 and $5. Ultimately, it succumbed to a shocking drop, reaching a historic low of -$40.32 per barrel. This failure to contain losses led to a staggering crash of 306%, resulting in a record settlement price of -$37.63 one day before the official settlement.

Market Stabilization

Following this calamitous plunge, the market eventually rolled over to the next month’s contract, allowing for improved organization as traders sought storage solutions for excess oil. This transition was crucial in restoring some stability to a market that had turned extremely volatile just hours prior.

Analyst Predicts the Plunge

In an unexpected turn, one analyst had predicted that oil prices could plunge to zero a month before this historic day. While he faced skepticism and derision at the time, his foresight demonstrated a deep understanding of the underlying market conditions. This prediction turned out to be remarkably prescient as traders scrambled to navigate the fallout.

Fortune Favors the Bold

That fateful day proved incredibly lucrative for nine traders from Essex, who collectively made a staggering $660 million. This remarkable feat was achieved through strategic trading practices, including profiting from selling futures amidst fluctuating prices and executing advantageous spread trades.

“In a mockery of the norms of commerce, the Vega crew ended up being paid both for the futures they’d sold when oil was positive during the day and for those they bought via TAS,” according to trading data.

Impact on Traders

The financial windfall from that day significantly altered the lives of many. Traders like Demetriou and Pickering saw their accounts flourish, each netting over $100 million. Even those with little experience, like a young trader named George, managed to walk away with $8 million, highlighting the unpredictable nature of the market during crisis scenarios.

Current Market Status

As we reflect on this tumultuous day in trading history, it is worth noting that WTI prices have recently declined by 93 cents, settling at $63.75 due to emerging reports of progress in US-Iran diplomatic talks. This ongoing volatility in the oil market continues to remind us of the dramatic shifts that can occur within just a few trading sessions.