Energy Investment Banking vs. Energy Trading
Trying to decide between these two career paths. Would love to hear some input regarding the two and others who have made a decision between these two.
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Energy trading is probably preferably stability-wise and comparable comp-wise if the firm isn’t stingy. Energy IB is weird as sometimes companies go in and out of business per financing access like the seasons, and the big players don’t need bankers bc they have plenty of capital. Just my two cents as someone who works in neither of those areas (and doesn’t work at all rn. Fuck this job market, fuck this enormously)
Energy trading is fkn cool imo. Sure, its not the wild west like it used to be but you are still moving around the molecule from point A to B keeping this world turning. The micro and macro of it all is super interesting. Its a big puzzle and your just trying to solve it.
Tbh i personally do not know anybody in energy banking, so i will let somebody else comment on that, but i will say if you have aspirations of going to PE... go banking.
Otherwise, I think a career in energy trading offers you more optionality - say trading doesnt work out, business school to IB associate is always an option (if you get into a decent school). From my experience, tough to break into trading once you have some experience under your belt unless you are some quant / coding genius.
I'm in energy trading, have friends from school who also came down to Houston to do energy banking.
I didn't really have a hard time deciding between these two early on. I did some internship, realized I fking hate all things equity, corp fin related, and never want to read financial statements and do modeling type of work>trading it is. It's fun, for me its a 6-3 and I am an early person. I look at geography and policy, stuff I am interested in. It's just that sometime there can be no downtime in a day.
Comp ceiling is much higher in trading, I will even argue it's one of, if not the, highest ceiling for among a lot of jobs. Almost all the senior traders at my shop cleared 7-figure bonus last year with some taking home 10-20M.
Stability-wise, banking is confusing, some energy banking teams seem to get hit hard these few years. it feels surreal to see Citi, some of the best energy banking teams, just start to go nowhere. Maybe its Fraser? Maybe it's that the esg trend affects the financing side worse than the demand for energy--but take it with a grain of salt I am no expert in industry outlook. in physical trading, people still need power and gas, and we are still moving molecules in pipelines to power up families/companies.
You have a lot of exits if you're done making money. if you are an analyst, Analyst jobs are everywhere, if you have risk management experience, whether as a trader or ops, maybe you can help hedging for a producer or really anyone who use energy; you can go to funds or other shops. Or just biz school.
If you want a more finance function instead of risk function, or if you want to do PE, IB is a no brainer.
Could I ask what kind of shop you're at?
Prob too easy to guess but it's whatever. work in a bank. The trading arm here is basically a merchant tbh, it's just that the holding company is a bank.
Have the same question
Energy traders make the same amount of money if not more, and work half the hours. Thing is you almost always have to do a long stint eating shit in ops before you can sniff an opportunity at risk taking. Oil trading sucks, natural gas is far preferable. I’m biased but not wrong.
This isn't specific to energy, but there are very few people who would genuinely enjoy and thrive in both S&T and banking. In some ways they are on opposite sides of the spectrum in finance. It's also hard to say that banking is having a good year and trading isn't (or vice versa) because these two businesses have a negative correlation in terms of performance. This is a feature for banks, because they are diversifying their business. Also, assuming you want to build a career, to borrow from Gorman, you shouldn't base your well-being on one year of performance.
Generally, when markets are calm, you get more interest to do stuff like M&A, IPOs,...etc because people have time to think about stuff, and aren't panicking about other stuff. This is precisely when the markets division doesn't make much money. Not a lot of movement and tight spreads are bad for a market maker. And when stuff is going crazy, you see the opposite happen.
In terms of where you might fit in better, ask yourself this: Would you rather take a class where most of the work was building up to one big project or paper? Or have something like 3-4 smaller problems every day? If it's the former, banking is more your speed, and if the latter, S&T might be a better fit.
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