When crude costs dropped into negative territory for the first time back in April, 1 thing was apparent: There were several critical losers winners and — — from the oil pits.
A couple of months afterwards, Bloomberg News has identified a remarkable case of the latter.
Approximately a dozen veteran traders in miniature U.K. company named Vega Capital London Ltd. pocketed a whopping $500 million if the cost of a barrel of oil fell 40 within an hour daily and settled at adverse -$37 a cone, according to a source quoted in the narrative.
‘Vega’s traders made more cash than they might have dreamed of — and found themselves at the government’ spotlight’
Simply put, the dealers, in a strategy they used frequently before, vigorously sold petroleum in unison prior to the May West Texas Intermediate contract located at two:30 p.m. Eastern time. For the time being, it is a gigantic win, undoubtedly, but Bloomberg noted that authorities are looking into if Vega’s trades might have broken rules about settlement intervals and contributed to the dip in cost.
Caught on the wrong end of this historical move were tens of thousands of American and Chinese retail investors that jumped into tools pegged to the April 20 payoff cost.
“The thought that the anomalies that afternoon were a function solely of demand and supply would be fanciful at best,” Joe Cisewski, special counsel to Better Markets, clarified to Bloomberg. “Oil manufacturers, agents, and other market participants are sent into severe financial distress. Regulators will need to objectively and thoroughly explore what occurred.”
Would Vega have maybe seen this coming? A perfect storm of factors came to that drama that resulted in the freefall, therefore, as Bloomberg pointed out,”Vega’s traders left more cash than they might have dreamed of — and found themselves at the government’ spotlight”
Meanwhile, the petroleum futures reversed early losses to close higher on Tuesday as dealers awaited information on U.S. crude stocks. West Texas Intermediate crude for September delivery
Climbed 69 cents, or 1.7percent to finish in $41. 70 a barrel after trading as low as $40. 14. October Brent crude
Finished with a profit of 28 cents, or 0.6 percent, at $44. 43 a cone.