Five years ago, the commodity futures markets experienced one of the most turbulent days in history. The May 2020 WTI contract started at $17.85 and plummeted to a shocking low of -$40.32 per barrel.
The contract eventually ended the day at -$37.63, marking a fall of 306% or $55.90. As the market transitioned to the following month, it began to stabilise with more storage availability.
Analysts Predictions Coming True
Amidst the chaos, an analyst’s prediction that oil prices would fall to zero materialised, despite earlier scepticism. Additionally, nine traders in Essex capitalised on the situation, earning an astounding $660 million collectively.
The traders benefitted from both selling futures when oil prices were positive and buying through TAS. The profits from spread trades added to their earnings, with some individuals taking home over $100 million, while others made $90 million or $30 million.
In today’s trading, WTI is seeing a decline of 93 cents, landing at $63.75. Recent reports have noted progress in US-Iran discussions, adding context to the current price movements.
What we’ve witnessed in the past offers not just a vivid memory, but also something more useful — a reference point. When WTI collapsed below zero in April 2020, it wasn’t merely about declining demand or overwhelmed storage hubs. It gave rise to a moment where time, logistics, and market structure collided to force traders into unprecedented decisions.
Lessons From Past Turmoil
The story didn’t end with the closing bell that day. After the dust settled, prices recovered as traders rolled to later contracts and storage unblocked. That earlier chaos serves as a reminder that beyond headlines and extreme positions, it’s positioning and responsiveness that often determine outcomes.
We find it practical to compare that event with recent price action. WTI’s mild descent today, down 93 cents to $63.75, is tame in comparison, but it ties into broader themes that have re-emerged in recent sessions. Discussions between Washington and Tehran appear to be moving ahead, a factor that carries implications across the board — potentially expanding supply and affecting market sentiment in one go.
For us in the derivatives space, that ripple effect matters. Options pricing may begin to shift as implied volatility adjusts to possible announcements, and open interest on nearer-month futures could move accordingly. Those who remember what contracts can do under stress won’t ignore this.
From what we see, spreads are starting to flatten slightly. That’s a minor development on its own, but when you line it up with the political backdrop, there’s reason to inspect middle-of-the-curve contracts more closely. Past episodes support this way of thinking; persons who layered TAS strategies with directional futures positions found they didn’t need perfect timing — they needed the right combination of margin flexibility and firepower.
Speed, though, wasn’t everything. The Essex group — as we’ve come to regard them internally — combined timing with messaging. They didn’t rush; they waited, verified price triggers, used calendar spreads and, most notably, controlled risk in increments. That turned what some dismissed as risky gambles into breakthroughs measured not in basis points but millions.
This week and those to follow aren’t identical, but volatility still shows up — just in more subtle formats. The yield curve, wider political instability, and steady but uncertain demand forecasts make it unlikely we’ll have silence. It’s helpful, then, to keep disciplines sharp, explore fly structures or diagonal spreads, and look for any imbalance between physical delivery expectations and paper contract movements.
We’re observing mild upticks in volume with no surge in margin calls, which can be telling. Some desks are handling these levels passively, but behind every stable headline is optionality — and one should not delay too long before reassessing counterparty exposures in off-peak hours.
In short, that plunge into negative prices was not a one-off phenomenon. It forced many to update their systems, question their manuals, and reconsider what “price” really means. So while the $63 handle on WTI may seem manageable now, we are watching deeper — into forward curves, regional grades, and how Cushing inventories whisper direction before price makes it known.
