Energy IB to Commodities Trading
Hi everyone,
I'm an incoming energy M&A summer analyst at a top bank in Houston. Super excited about the opportunity, but longer term I want to work in commodity trading.
I was wondering if it is common to transition from IB to energy/commodity trading. Is it more competitive to recruit for a training program/full-time trading role after my IB summer internship, or after the 2 year analyst stint?
Considering WLB, compensation, and stability, is it better to work for a merchant (e.g. Glencore, Vitol, Trafigura), an integrated O&G firm (e.g. Shell, BP), or a prop firm (e.g. Citadel, Millennium)?
Thanks so much!
Recruit now for a grad program or TDP at a major or trade house. You do not want to wait until after you graduate. Happy to also talk over pm as I come from a somewhat similar background.
That would be great! Could you give me some advice over pm? Thanks a lot!
Have to respectfully disagree with this. Spent 5 years at one of the merchant shops OP mentions (and 5 years at a major prior to that), and the new-hire/trader development programs for the large majority of participants do not result in a trading role. You spend 2-3 years cycling around the trade floor doing the b*tchwork jobs that regular employees can’t be bothered to do.
Hard truth is that the best way to be a trader at one of these shops is to be hired on as one. Get some VaR/PnL responsibility on your CV (no matter how small - sometimes not even necessary), and aim to go direct into a trader/junior trader role.
Shell / BP TDP in the US definitely lead to trading jobs. I've met countless people who made it this way. Probably the best way. Trade houses might be a different story - especially Traf - but have met a few Glencore people in NYC who made trader internally and / or externally. Not sure how it's like outside of the US.
If trading is what you want to do why would you wait any longer than you have to? You talk about stability... if you really care about that you might want to reconsider trading. Traders that get paid based on their own book are only a bad year away from getting fired. Every single day you go to sleep you have to think about how your book is doing. It is not for everyone.
Makes no sense to apply 2 years in as a 24-25 year old.
No one prefers external post college applicants that have no direct overlapping experience. Much better to try to get into a program right out of college.
Bp TDP is preferred as the most well established and fitting a variety of backgrounds. If you are super good at math/programming and get on a good gas/power desk at Citadel or a prop firm, that could be better.
Outside of that, it becomes a lot more situational- still good spots but beware that there are a ton of 30-40 year olds still trying to network in to be a trader or waiting for their bosses to quit. It’s a lot less structured than the banking route and depends on right place/right time quite often. So this is a big downside vs what you have now.
There are no promotions that work on fixed timelines. I see plenty of people 10-15 years in who are barely making 200k or are even under. And quite a few people also retiring in their mid 30s to mid 40s as well. Who has a great career and who has a frustrating one is truly not related to job title, seniority, or sometimes even company. And it’s hard to tell from the outside what is happening.
Agree with oil_quant.
Spent a few years in a phys shop & can guarantee you that your banking background won't help you in any way. In phys commodities you gotta start asap. It can be a gruelling journey, with zero certainty & encompassing very unintelligent work. The earlier you start, the quicker you can re-evaluate things if need be. Also, note that phys traders can be quite under-educated compared to your average boss in banking. Therefore don't be surprised if they won't care about your school/master's/MBA/whatever.
But mind. As much as a TDP is the most efficient way to navigate the industry (starting from MO is the most painful way), if you are not well connected internally (no one backing you), even one mistake along the way can cost you a seat. Thus, if you go for it, it has to be pure passion i/o acquired interest in an industry making great headlines on account of the bonuses it pays.
Have seen multiple kids aged +25 switching from finance, and most regret the change. They traded a structured career, where success is guaranteed (you don't become Associate-->VP-->ED because you do something extraordinary, it's just about seniority), for the remote possibility of making a huge bonus. Couple of years in the job and there is no way back, aside from sporadic opportunities in commodity derivatives sales, for which however a corporate client base is often required. Also, a lot of traders are supply traders/guys managing internal flows. These guys don't make even close to what the rainmakers you read about make. However, they easily work as much.
Just my 2cents since you've got a bright future ahead.
Really agreed on the trader title not meaning much in a lot of cases. Plenty of senior traders don’t make a bonus, don’t actually trade their own views, make less than associates at a bank. And there is still a line out the door at those firms for people to make trader. Still a great, balanced career that will get your kids in a nice house in a decent school zone, but so is being an accountant or a pediatrician.
The variance in this industry really can’t be understated. Tons of traders/analysts are stuck at basically entry level equivalent pay in other parts of finance. While some make millions or tens of millions. And it’s all a black box, where every career is different and you can’t easily replicate someone else’s amazing track due to no regime staying constant, no situation being the same. Even once you “make it” and could technically retire, you aren’t really ever sure what the next year will bring, if you’ve already peaked, etc. Don’t ask how I know haha.
For a lot of people, more predicable lockstep promotions at banks, other corporates will probably be better. That is another kind of “job stability” (besides just getting fired) that you need to know before going too deep.
So if you have the choice, I would strongly suspect that the average NPV of a GS/JPM type IB analyst is significantly higher than “commercial analyst” at Vitol, TDP at Exxon, etc. Don’t be fooled by proximity to power or headlines. Also exits to other things (mba, corporates, vc, etc) are on a completely different planet if you want to switch. There’s a decent number of laid off/fired traders out there who are permanently unemployable, who didn’t make millions in the first place, who can’t get another job because their market is niche, the 10 other traders in that market don’t respect them, they can’t even start as analysts again because they don’t have technical skills, etc.
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