Finding independent physical oil traders/trading houses

Hi everyone,

I currently work for a Canadian family office. I was tasked with a job to find creative, aggressive, independent oil traders with the goal of deploying capital with them.

Any suggestions on where to find such individuals/firms would be highly appreciated.

Also I apologize in advance if this violates the rules of the forum, but I am not selling anything and this is not a job offer, just trying to figure out where to start.

Thanks in advance!

4 Comments
 

Not sure what you have, but have you tried using databases like evestments to help screen? Do you guys have consultants? If so, they should have some online tools and ODD docs that you can use as well.

 
Best Response

I read your job description. It's not going to work. I've seen large O&G trading firms try and set up a purely prop physical trading shop with no assets in a specific geographic region and they got crushed. You need assets (whether it's owning or leasing) to make this work long term. Why not just a hire a financial trader?

If you really want a physical guy, you will also need a scheduler. Prop physical trading is so much harder if you don't have physical assets and you are going up against some stiff competition from banks, producers, refiners, and midstream companies who many of them have prop trading. When you get into this space you don't deploy an initial small amount of capital, you go big or you go home. Strategically it doesn't make sense to do it on the small scale unless that is your niche ie: trucking crude from various small producers, aggregating volumes and selling that to market. This might be a term agreement then, but again, you need to have access to trucks, you won't have ratable production from small producers so you constantly have to worry about being too long or too short and if you dont' have access to storage you will be at the mercy of the market. Just a bad idea for some family office to go into physical oil unless they have expertise etc. Terrible idea for a trader to go to a family office unless they give him x millions to basically set up his own trading business where he will be able to negotiate tank leases, pipeline space, etc.

 

why physical? the costs of entry are really high, you need assets like pipeline space, tanks, and maybe even refineries. I have worked for a big physical trader. Assets were everything to us. I don't know how you could trade physical without that. If your clients want to be in oil, i'd recommend the financial stuff- wti or brent contracts. Maybe even swaps if you have the ability. Physical traders are getting into the details of different grades of crude, location arbs, etc. All of which require a great deal of knowledge

 

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