Compensation of commodities trading firms compared to supermajor oil and gas companies
I was having a conversation with a friend about the compensation of an oil trader at a company like Vitol, Trafigura, Glencore etc. compared to one at a company like BP, Shell or P66, and assumed that the compensation was much greater at the trading firms. However after looking at glassdoor the salary figures were around the same for all of the above mentioned.
Of course I'd assume that the bonuses at trading firms are much greater, but I have no way of really confirming that. What exactly is the incentive to go from working at say BP to working at, say Vitol? I've heard the cultures are much different, with the trading firms being much faster paced, but is the salary after bonuses that much greater?
I will leave it to someone else who is more knowledgeable about the industry to discuss salary differential between Majors and Trading houses.
As for the incentive for working at Oil Major compared to Trading House is that Oil majors have HUGE asset base and therefore have a reliable and high quality information about the fundamental demand and supply of oil and gas and their corresponding derivatives. This information leads to consistently profitable trades and given the size of the majors, they can always issue highly competitive prices. That said, majors do differ in terms of their trading risk appetite, for example the european majors (chiefly BP and Shell) are far more risk tolerant than many american majors. So working in a Major's trading operation you will benefit for high quality information, huge asset base that offers greater optionality and therefore more trading opportunity and its a great platform to grow yourself as a commodity trader.
Incentives for working at a trading house includes higher risk tolerance, more nimble of an organisation than a Major and greater cut of PnL.
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Thanks for the response. It sounds like you outlined mostly the difference in culture, which I'm fairly familiar with. Does the greater appetite for risk though automatically mean that your average trader is going to be compensated more? Or does higher compensation come from the fact that taking greater risk equals greater reward? Basically what I'm trying to get at is why would somebody who's making good money at a supermajor go to a more stressful environment if their take home pay is the same?
Pretty accurate for the most part. Only thing I wanted to mention is that oil majors trading arms are not allowed to access the actual production numbers from the e&p arm of the business. This would be too similar to inside trading. So they don't necessarily have inside information that consistently leads to profitable trades.
Bingo. Also I'd note that trading at a major/bank will involve in getting in deferred comp/company stock whereas trade shops are going with a large portion of cash especially as the bonus numbers get up there. I'd also say that most majors/banks basically have a large book of business so the "seat costs" are higher. If you're at a bank and E&P hedging flow is throwing $20M/yr of flow a year you're going to get paid very differently than if that's pure spec PnL. Similarly majors have optionality built into their desks where they are optimizing their assets. Like you said for the most part trader base salaries will be relatively comparable.
Bump. Just got an offer to intern in the trading department of a supermajor, however, I would be in risk. Is this a good way to get into a bank or something similar later on? What are exit opps like? I would have to move to another country, accept a shit salary and so on
Forget working for a bank, try to get a trading role at a supermajor. Dude running the Cushing desk at BP makes mid-8 figures, mid-7 figures is definitely possible for desk heads at BP/Shell.
Doesn't get better than that
Thats why traders in those seats never leave..what could entice you to go somewhere else
Trading at a supermajor gives you a super advantage and tons of asset backed leverage. They can do things folks at spec shops just cant step on
As someone who was recently offered both; a gas trader role at a supermajor, and a commodity trading house it all came down to me personally. I'm young, no debt, lean, I could take this large upside risk. The pay difference base wise isn't that significant, bonus wise it's huge.
Now, if I had a family, debt, and situated in a less liquid hub in the event I bottom out then supermajor it is. That's a career.
I'm swinging for the fences so I accepted a position at a trading house.
Going to echo butter here, but in a different industry just to provide perspective.
Was offered a trading role at a large utility with tons of generation assets, very safe role when then trader loses, let’s say $200k, one month but the nuclear generation asset makes $10mm. That being said, bonuses were fixed, and the guys trading above you will be there for the next 25 years.
Going to a prop/spec shop will definitely be more pressure but if you’re young and can take the jump, the upside can be huge. We operate as I’m told ‘as a hedge fund within the company’ and the director level guys get a chunk of book and 45% of their salary in shares, but you have to pay the rent too, whereas at a supermajor/utility you probably don’t have to.
Now if I wanted to go sit in the seat I’d die (retire) in, supermajor, or in my case a large utility would probably be the route I would take.
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