Power and Gas Trading

Good afternoon,

I've been looking at some job listings on LinkedIn and other websites for power&gas trading roles for different companies and I've come to the realization that I'm not entirely sure what defines a "trading" role at different kinds of companies.

I'm currently working for a utility company as a prop trader; however, we also have portfolio managers that hedge our production and try to increase/decrease our hedged positions based on research etc etc.

I noticed that for a lot of the power & gas trading roles that I've seen online for banks define the trading activity as hedging/risk management for clients of the banks. Is there no speculative trading at the banks?

What does the power & gas trader role encompass at companies like Shell, BP, Trafigura, Vitol etc? Which shops are purely speculative that reflect performance via a "book". How is P&L defined when you are managing client flow or hedging?

I would really appreciate it if someone with a broader understand of the different types of energy trading roles could explain what the different kinds of trading roles exist at different companies. Which roles take speculative positions, manage client flow, hedge etc..


Thanks in advance!


 
Most Helpful

Gas

Producer-your selling gas trying to maximize sales price of the physical molecules and keep the gas flowing. Financial hedges are most likely done at the CFO level and require pre-approval by board based on cash flow requirements and strategic initiatives.

Midstream-managing gas control and maximizing your percentage-of-proceeds contracts or take-in-kind customers to keep the plants off flare and manage takeaway capacity

Utility/refiner-purchasing gas minimizing your feedstock costs. Financial hedging done at the C-level

Trade Shop- making money by physical asset-based customer deals or prop trading around that. Derivatives used to express a prop view.

Bank-Managing customer flow, hedging deals with implied margin day-1, utilizing balance sheet for park and loan or reserve based lending customers

Shell, BP- All of the above but most likely different desks, different traders doing each of these aspects of the business

 

Thanks for the replies, can I ask you what sort of P&L is considered average, good, great, and fantastic? I’m not sure if this is the industry standard, but in power & gas I think it’s a multiple of DVaR? How does this compare to oil (paper) or metals?

BR

 

I worked for a small shop that was a fund within a hedge fund type group. When I was on the RT desk my ‘seat cost’ was $600k and that was purely speccing flows, virtuals, P2Ps/CRRs, daily puts and calls, and bal days in ERCOT.

When I got promoted off the RT desk we were purchased by a company who had tighter risk limits and as a short term power trader my number was $1.2M. However, we got a higher salary in lieu of % of book because that could not exist within the company’s structure. This position allowed me to trade the curve, Bal-weeks and bal-mo along with longer term options.

 

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