- London-based oil trading house BB Energy bought 250,0000 barrels of oil when US prices turned negative on April 20, raking in a huge profit in the process, Bloomberg reported Wednesday.
- BB Energy was one of the few trading houses that had storage capacity at a time when other traders were scrambling for options, allowing it to buy up the historically cheap oil, an unnamed source told Bloomberg.
- The Commodity Futures Trading Commission warned on Wednesday that the West Texas Intermediate for delivery in June could also turn negative upon expiry.
One trader bought 250,000 barrels of oil and secured a rare payout at a time when oil prices turned negative, causing jitters in markets and leaving most other traders scrambling to find storage options across both sides of the Atlantic, Bloomberg reported on Wednesday.
But for BB Energy, a London-based trading house,the historic oil market crash was golden opportunity owed to its competitive advantage of having storage capacity over other firms, a source who was not authorized to speak on the topic, told Bloomberg.
BB Energy bought around 10% of all barrels of WTI crude futures for delivery in May.
US oil prices hit an all-time low of -$37.63 on April 20 due to an extreme shortage in storage options for oil, meaning most traders apart from BB Energy had to effectively pay traders to take the oil off their hands.
It remains unknown whether BB Energy is still holding on to the barrels it bought and how much the trading-house paid (or indeed was paid) for them as well as how much it made.
BB Energy trades 20 million metric tonnes of crude and petroleum products annually.
Lack of storage options, particularly at a key storage facility in Cushing, Oklahoma, and the reduction in demand for the commodity during the ongoing coronavirus pandemic, have both contributed to WTI 's historic price crash.
Oil has been ravaged by the coronavirus pandemic which has all but shut down international travel, and greatly reduced manufacturing output, in turn torpedoing demand for oil.
Concerns are mounting that the June contract for oil could follow the same pattern as May, with demand for storage outweighing supply at the expiry of the contract, pushing oil below zero again.
The US Commodities regulator issued a rare warning on Wednesday urging market participants to prepare for a repeat-case scenario of negative prices for the June WTI contract.
"We note that we are issuing this advisory in the wake of unusually high volatility and negative pricing experienced in the May 2020 West Texas Intermediate (WTI), Light Sweet Crude Oil Futures contract on April 20 (the penultimate day of trading and expiration of the contract," the Commodity Futures Trading Commission said in a notice.
On Wednesday, OPEC has downgraded its demand forecast by a third, saying it expects demand to fall by just over 9 million barrels per day in 2020. OPEC had previously forecast a slump of of 6.84 million barrels per day.