How Nine Traders Profited from Negative Oil Prices
In one of the most unexpected financial events of 2020, crude oil prices fell below zero on April 20. It started as a regular trading day, with West Texas Intermediate (WTI) oil futures priced at $18 per barrel—a remarkably low figure. But the situation soon turned extraordinary. By 2:08 p.m. in New York, the price had plummeted to negative levels, making it essentially a burden to own oil; sellers were forced to pay buyers to take it off their hands.
The sudden crash escalated, and within 20 minutes, oil prices had dropped almost $40, reaching a historic low of -$38 per barrel. This marked the lowest price in the 138-year history of the New York Mercantile Exchange and likely the lowest price in the history of oil as a commodity.
Amid this chaos, a group of nine traders from London's commodities market, known informally as "The Essex Boys," seized the opportunity. Led by a trader with the nickname "Cuddles," they leveraged their market insights and experience, betting on oil's collapse. Within hours, they managed to turn the negative oil prices to their advantage, collectively earning $660 million. Their success illustrated both the volatility and potential of commodities trading, especially in times of unprecedented market disruptions.
The Essex Boys’ substantial profit was not only a testament to their strategic prowess but also a reflection of the extreme unpredictability in global markets that 2020 brought.
This historic drop in oil prices stemmed from the pandemic’s dramatic effects on global demand, which overwhelmed storage capacities and created the first instance of negative pricing for crude oil. As the world watched, these traders capitalized on the volatility, cementing their story in the annals of financial history.
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