While COVID-19 has affected nearly every industry, one surprising victim was the West Texas Intermediate crude oil market. On April 20, 2020, West Texas Intermediate crude oil experienced an unprecedented period of volatility, ultimately causing prices to fall below $0, and settling at negative -$37 per barrel that day. In a one-hour period alone, the price of West Texas Intermediate crude oil dropped $40. The closing price on April 20, 2020, was the lowest price per barrel since oil futures trading became available on NYMEX in 1983. The cause was the lack of short-term demand for oil, brought on by COVID-19.
However, recent reports by Bloomberg suggest that a few people managed to profit off the extreme volatility. Specifically, Vega Capital London, Ltd. (“Vega Capital”) who made over $500 million off the price inversion by aggressively selling West Texas Intermediate futures contracts. Vega Capital’s excessive profit, earned in one short trading day, has raised eyebrows from both regulators and other market participants for making uneconomical trades. For more information, please contact us at investigations@lowey.com or by phone at (914) 733-7201.