Oil vs Nat Gas Trading

I was recently offered a summer internship at an oil major at a certain location, my home town, in their natural gas trading program and accepted it. I am extremely excited about the opportunity! But, I have always been interested in crude oil. Maybe I am a little biased; as I took a certificate program in Global Oil & Gas Management that was strongly focused in crude? Since then, I have been doing quite a bit of reading into the news and the process of crude trading. But, upon receiving my internship offer, I found out that their crude trading is actually at a different location than their nat gas trading for this major. I was hoping to get to touch a few different commodities before having to pick one commodity career path over another.

I guess what I am asking is:

What are some of the biggest differences in a day in the life of crude trading vs nat gas trading and career potential? (I once found an article that really dug into this topic but haven't been able to find it again)

Would it be frowned upon to ask if I could be transferred to a different location to see what crude would be like if I am offered a position into their graduate program?

Any other advice or insights?

Thanks

 

haha that obvious? But it's not that I want to be in Chicago. I would actually much prefer to be in Houston, as that's where I'm from and I love it there. But, I did want to be able to touch a little bit of a few commodities to see what they were like before I chose one commodity career path over another.

 

Yeah I didn't mean that you wanted to be in Chicago for the city. More so for the crude desk.

I am just a student too but I am in Houston so I will give you my take on it. I can't comment on what it is like to trade any of the products so I won't get into that. But based on what you said it seems like the Houston spot is better.

You are in the energy capital of the world. Providing you more chances to network with people at other shops and build relationships. You mentioned you would like experience with different commodities. That is only going to be available in Houston. BP's crude desk in Chicago is an outlier. Here in Houston there are all the majors, trading houses like Vitol, Trafi, and Noble, and tons of midstream groups like Kinder Morgan and Enterprise. These companies trade everything under the sun and offer many, many more chances for you to land a trading gig somewhere. For example, say you are in Chicago for the internship then and end up landing a full time gig there. You do the three year rotation, aren't offered a trade seat (which is a likely scenario given how competitive those things are), and then decide you want to go to a somewhere else in order to become a trader. If you were in Houston it would be very easy to make that switch given the chances you would have had to network and the number of opportunities. This would most likely not be in the case in Chicago.

 

That is a good way to look at things. I guess I hadn't factored in the opportunity to extend your network in Houston vs Chicago. But, I have read it can be difficult to switch commodities during a career path, so a transfer to a crude desk or any other commodity in a different company may be a difficult opportunity to come across while working in nat gas?

Just out of curiosity where do you go to school (U of H?) and where have you applied?

P.S I don't believe BP's Chicago office is just a crude desk? I am pretty positive that is where they trade crude, gasoline, jet fuel, ect.

 

I have heard the same thing as well about switching between desks being difficult. I am sure someone else could chime in on that and have a much more knowledgable answer though. Switching commodities might be difficult but companies isn't. Which is why I think Houston offers more opportunity than Chicago.

I am getting my masters at Rice right now. I applied to all the majors and trade houses with graduate programs. I got interviews with most of them but the feedback I got was that I lacked enough experience from a quantitative perspective. For example, talking with the HR manager at one of the large trading houses he said the person they chose over me had an internship at an investment bank and at an oil major in one of their trading programs. Sometimes you just get beat.

So now I am applying to some of the smaller shops and midstream companies here in town to get on their trade desks. They do recruiting a little later, if at all.

I am not sure about what BP has in Chicago. I would imagine a couple minutes of googling would provide that answer though.

 
Best Response
Rotterdam:

I have heard the same thing as well about switching between desks being difficult. I am sure someone else could chime in on that and have a much more knowledgable answer though. Switching commodities might be difficult but companies isn't. Which is why I think Houston offers more opportunity than Chicago.

I am getting my masters at Rice right now. I applied to all the majors and trade houses with graduate programs. I got interviews with most of them but the feedback I got was that I lacked enough experience from a quantitative perspective. For example, talking with the HR manager at one of the large trading houses he said the person they chose over me had an internship at an investment bank and at an oil major in one of their trading programs. Sometimes you just get beat.

So now I am applying to some of the smaller shops and midstream companies here in town to get on their trade desks. They do recruiting a little later, if at all.

I am not sure about what BP has in Chicago. I would imagine a couple minutes of googling would provide that answer though.

keep in mind you dont get a choice of product when you pass the TDP exam. So lot of what ifs and you dont make the final call anyway

 
ASUgrad2017:

haha that obvious? But it's not that I want to be in Chicago. I would actually much prefer to be in Houston, as that's where I'm from and I love it there. But, I did want to be able to touch a little bit of a few commodities to see what they were like before I chose one commodity career path over another.

Do Nat Gas then ask to be in NGLS in Houston. You can thank me later

 

Former gas trader here so my opinion is obviously biased. In my opinion gas is the better market to trade. You have better availability of data; so much so that you can model the entire North American system. There is better volatility in locational pricing as gas can only be moved by pipeline. While crude can experience good differentials due to the marginal molecule being moved by pipe, truck or rail the day to day vol doesn't tend to be as fun. Plus crude (and product) pipelines have the exact opposite transparency to gas.

Short answer for biggest differences? Nat gas trader sits around all day and worries about weather. Crude trader sits around all day and worries about gdp growth, geopolitics and opec.

 
Washedupandburnedout:

Former gas trader here so my opinion is obviously biased. In my opinion gas is the better market to trade. You have better availability of data; so much so that you can model the entire North American system. There is better volatility in locational pricing as gas can only be moved by pipeline. While crude can experience good differentials due to the marginal molecule being moved by pipe, truck or rail the day to day vol doesn't tend to be as fun. Plus crude (and product) pipelines have the exact opposite transparency to gas.

Short answer for biggest differences? Nat gas trader sits around all day and worries about weather. Crude trader sits around all day and worries about gdp growth, geopolitics and opec.

agree 100%. You will see Nat Gas traders move on to a ton of different things post a major while you just dont see the same in crude or products

 

thanks for the input! I have never been a huge fan of the fact that one sentence spoken from the Saudi Arabian King or Prince can impact the price of oil by up to 10%. It seems like nat gas is more reactive to traceable and more predictable price drivers? Also, would be concerned about the growing glut for nat gas, not to say that oil is any different right now?

 

It is correct to say that nat gas trades on a more fundamental basis than crude (in the futures market). I would say that both cash markets trade very fundamentally but I am not particularly well versed in physical crude.

The weather is a huge component of gas; good traders attempt to structure their trades in such a way that they are not weather dependant. Although virtually no trade in gas can eliminate the weather.

I would expect the good crude traders attempt to mitigate the randomness of Opec or other geopolitics - although I think that might be harder.

As someone starting in gas I don't think I would care about the low futures price right now. You are looking at several years before you do any real trading.

 
Washedupandburnedout:

Former gas trader here so my opinion is obviously biased. In my opinion gas is the better market to trade. You have better availability of data; so much so that you can model the entire North American system. There is better volatility in locational pricing as gas can only be moved by pipeline. While crude can experience good differentials due to the marginal molecule being moved by pipe, truck or rail the day to day vol doesn't tend to be as fun. Plus crude (and product) pipelines have the exact opposite transparency to gas.

Short answer for biggest differences? Nat gas trader sits around all day and worries about weather. Crude trader sits around all day and worries about gdp growth, geopolitics and opec.

Definitely agree with this statement, I sit as a crude desk analyst at a oil major in London. What you usually find is that gas is far more of a quantitative field and therefore strong mathematics and modelling are very beneficial, whilst in crude it is important to understand you core fundamentals a lot more, as they are often the cause of many market fluctuations.
 

Sit on a crude & products desk currently, but have done rotations on the gas side. I think it is important to make clear here that when you are new to the field, 0-3 years in, it is possible to switch markets and is at times encouraged to understand how different markets function. However, once you become more knowledgeable about a specific market transitioning becomes much more difficult. In your example Nat Gas (US focused), basis gas trading (regional focused), and crude (globally focused) are three very different skill sets.

 

So I'd say the biggest differences between products and desks is going to be driven my the scope of the market. If you're on a crude desk trading WTI & Brent financial futures and swaps you have a very broad macro market to track. On crude you look at supply and demand balances, storage changes, pipeline outages, cargo movements, OPEC chatter, EIA & API numbers, managed money positioning, physical cash markets, diffs between regions, retail flows, etc. Whereas on a US focused desk, such as HH Natty, you'd look at pipeline movements, imports & exports, power burn, weather, etc. Then, in market such as power you're looking at individual powerlines, power plants, weather in individual cities, etc. Let me know if you'd like more clarity.

 

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