I currently work in the back office (contracts) and have intermittent contact with the traders – mostly in the form of attempting to reconcile any discrepancies that might arise between our understanding of the deal and our counterparties (price, volume, whatever). Obviously, I’m here because I eventually want to trade.
I noticed an interesting trade today – a domestic grade priced on a Brent index. I think this is interesting and can’t figure out why this would be done. I think this might be a good opportunity to establish contact with the trader and show him that I’m not just a back office clock puncher.
However, I don’t want to overreach my boundaries, be unprofessional, or have him think I’m a tool.
Also, for those of you with experience, is this a good question anyways?
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where is delivery?
Delaware City Refinery.
Harbinger, as for contacting him, should I just shoot him an email?
I was always like calling. Emails are easier to ignore, brush off or forget about. How are you usually in contact with them?
I'm not a senior trader, but based on my interactions with traders... most people are very receptive to questions if you're genuinely curious... if you want to leave a good impression and want them to think you're not just a "back office clock puncher".
Seriously, don't be afraid of talking, making friends, learning in earnest. Just don't make a nuisance of yourself and most people that aren't toolbags will be very kind/receptive I've found...and these interactions are the fountain of knowledge from which you should drink...
I'll echo the calling before emailing comments. Emails from the back-office asking for clarification can easily convey passive aggressiveness while a call would be an easier way to convey genuine interest. Plus as clever as the trade may be, there's probably a reasonably short answer for it.
If I'm not mistaken, Crude that is Landlocked in North America is generally priced on the WTI benchmark, but once it moves to the Coast it can be priced on the Brent Benchmark. This is primarily due to the fact that there is not enough transportation capacity to move Oil out to the coast.
I wound up emailing him. I haven't been at the company long enough to feel comfortable calling. I want him to be able to ignore it if he doesn't feel like answering. I don't want to include every detail, but I made a big effort to sound genuinely intrested and kept it short. Here are the lines that don't directly reference the details of the trade.
"I know you’re busy but I was curious what your strategy was on this particular trade and if there is an overarching strategy to pegging a domestic to a foreign crude. I know you’re really busy and I hope I’m not wasting your time, I’m just genuinely curious and am trying to develop an understanding for what certain strategies look like. Thanks a lot."
That is an awful email. You sound like a little boy who is begging an adult.
You are colleagues, act as so.
Just saw your reply, no offense but you most likely failed and most likely will never see a response. The earlier you introduce and put a face/voice to who you are, the easier it will be for people to recognize if you do good work. No one has time to find out or cares to, up to.
Email? Calling? Do you work in a back-office in a faraway dungeon or so. Do you not have company IM or know where the trader sits?
If you have never met the trader, this is the time to do so. Hopefully you have been kicking arse and taking names and the trader does not think your a tool or retard, but either way who cares. Next time you have a question/issue, im them if you dont have company IM. Walk over and introduce yourself, make a wee bit small talk then ask your question. You do not need to mention they are busy, we know we are busy do not make it sound like your time is less valuable than theirs. Do not make it seem like its a waste of their time to answer or help someone.
Got it. Hopefully I will hear something from him and can make the move to meeting him. If he doesn't respond, should I leave it be or IM him and ask if we can meet?
Leave it be. Wait for next question and IM him or walk to the desk (after markets close) and ask.
USGC grades are starting to be priced against brent because they compete with more international crudes
Act as if...
"Hi trader first name, I was curious what your strategy was on this particular trade and if there is an overarching strategy to pegging a domestic to a foreign crude. This not really BO related, I am trying to expand my personal knowledge of physical crude strategies. Thanks a lot !
Bob"
IM would be much better tho... He will reply only when he has time. If the email lands at an unconvinient time, it will most likely be forgotten..
Yea that was a pretty desperate email. It would have been much better to walk over to the desk and ask in person, at least then the trader can put a face to the name.
I would delete that email. How about saying, in person, "Hi trader first name. How about some beers at 5? I'm interested in how you broke into trading?"
No offence but I'm shocked that you work in a physical trading shop and don't know the answer to this yourself. You must process thousands of trades every day. That in itself is educational. You see flows. Coupled with all the research your organisation will have access to and, failing that, all the free information you can get online about trading oil and about differentials.
I'm a financials crude trader and if someone from the BO/MO asked me that id tell them to google it.
Short answer: the refinery is probably hedging it's WTI/Brent exposure, taking a punt on the tightening diff or the seller has decided that based on the Delaware city location the international price of Brent is more relevant than the domestic and has priced the transaction accordingly. This is common practice and most east coast refiners have brent based pricing. Used to be the same case on the gulf coast but now there are more efficient assessments such as LLS/HLS/MARS etc.
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