On 20 April 2020, the US WTI crude oil contract crashed to -$37.63 per barrel, something many traders never thought was possible. The sudden move led to heavy losses for several MCX crude oil traders in India.
After more than 6 years, the Bombay High Court has upheld MCX’s settlement process and ruled that experienced traders cannot seek court relief simply because an unexpected market event caused losses.
A few takeaways:
- Crude oil traded at negative prices for the first time in history.
- MCX settled contracts based on the linked NYMEX prices.
- The court said market participants voluntarily take trading risks.
- Large losses alone are not a reason to reverse completed settlements.
The market can do things that seem impossible. Risk management matters more than certainty. The day crude went negative is a reminder that in trading, protecting capital is just as important as making profits.
