Good evening,
Long time passive WSO lurker here that has decided to finally register and engage on the forums.
I finished my postgraduate degree towards the end of last year and after several applications and interviews I managed to land a job as a junior trader at a power utility company. I have been working there for a couple of months and I am about to open my own book, where I will focus on european power markets, NGOs, and the carbon market. I will be trading financial products, not the physical side of the business.
My first question is whether european power, NGOs, and carbon are worth specializing in. I have read numerous discussions on the forum regarding energy trading, specifically oil and gas, and therefore I am wondering if those commodities are more exciting products to trade and if it would be possible to potentially move over to those markets in the future. Also, is the renumeration considerably higher for those commodities in general?
Secondly, I would love to know what you guys think about the shift towards more quantitative implementations in commodity trading. I'm struggling to find positions available where prop trading the beforementioned commodities is the primary role, and of those I have found there does not seem to be the same quantitative requirements as opposed to more quantitative trading positions in equities. The reason I'm asking is that I have access to an overwhelming amount of data at work (as I imagine most commodity traders do) which I'm analysing frequently, however many of the other traders I have spoken to don't have advanced programming skills and what not. Is this normal?
Lastly, where do the most successful power/carbon/gas/oil traders go? Do they work for big utility companies or perhaps at the 'Majors'? Are there many funds that specialize in european power and carbon?
Sorry for the lengthy post. If you have the time to answer my questions or perhaps have a question for me, please feel free to reach out and I'll answer whenever I'm available.
Cheers! :)
First off, wont lie man no idea an NGO is or stands for but I assume its to do with power/carbon. That being the case you are entering one of the hottest sectors in all of trading, truly a quick google search can solve that for you.
Quantitative skills, you need to be mindful we are in an era “energy transition” and with that comes “skills transition”. You cannot remove senoir people who hold key fundamental information for those with superior skillset right away. So instead most analytical roles and pretty all vendors are moving to a quantitative tool kit. One shop in particular, analytics team builds models and outsources all database/higher end coding to a coding firm.
A bit out of scope here (dont trade europe). But my sense is europe is not liquid and fully “unregulated” to have full on FTR style trading all over. That said I think europe moved to closer “with-in month” trading a lot faster than the US simply due to they invested bigly in renewables way faster. So the transition will continue.
Funds/independent hiring like crazy for Euro Power dudes.
Missed a part of you question but you are going to learn in particular in europe, you could have 15 million data sets and sometimes stuff wont make sense till you find a guy who got the info from a guy from a guy. Just way it is majority of these assets are optimized and owned by massive congolmerates who do not like to share info. An example is how does a plant decide their hedge ratio, how serious they take their 2week out wind forecast, some of these places may know their plant trips more/less etc.
Energy guys are getting paid much more for the time being. Look up the HC insider podcast.
Guess this where mainstream is protected somewhat and you need to be in the know to find some information. Basically coming out of the pandemic, Europe made a commitment to take "EU Carbon" pricing seriously this has led to EUA to be one of the most talked about topics for 2021 additionally the developing world (Asia) came out of the pandemic gangbusters so Europe went into a full out "energy crisis" in early 2021 summer and then UK power broke in late Q3 and since then it is in a prolonged energy crisis. The energy mix is has been changed by renewables over last 3-5 years massively as retirements from coal/nuke took place.
Yes majority of good power traders have a sense of weather and the major meteorological patterns/analogs and teleconnections. There is research being done right now on "wind speed" and "wind speed vs wind chill". Beyond that, to understand the quant shift in power need to look up things like duck curve, lack of new power lines/congestion etc..I cannot really get into that here ha.
Truly be lucky you have a very strong skillset, coming into one of the key markets worldwide right now where the stuff youll see in short-term here one may never see again just an a crazy environment to learn.
Lastly, you can get on linkedin and follow like ICIS guys and see that every morning european power/gas is basically spoken all over. Again majority of mainstream is not seeing this as the EU governments are secretly bailing out their people for now...that all I said I am on the side of "transition" and think EU electorate as a whole is willing to pay for it "crisis or no crisis".