Day in the Life: Oil Trading Research Analyst

I feel like it is often said here and at times overdone, but while every day is a bit different there are certain tasks that happen every week or month. I’m going to split the below into three different types of days to compare.

Day 1: Weekly and Monthly Updates

Monday is generally the day of the week in which I get most of my once a week tasks accomplished.

5:30 AM
Wake up, walk the dog while listening to a podcast, get ready for the day, pack my breakfast, and make coffee.

6:30 AM – 7:30 AM
After arriving to work and getting my breakfast out I fire up my computer and load everything to get the week started. On a trading desk this process takes a few minutes as I load multiple instances of excel, email, Bloomberg, ICE chat, and PDFs to read from over the weekend.

From here I begin to update the first set of sheets. In oil markets, it is important to follow refinery turnarounds, or TARs, especially during the maintenance seasons of the fall and spring in the US. Each week when the EIA numbers come out one of the headline numbers is for crude runs, inputs into a refinery, and these numbers are dependent on refinery TARs. For each sheet to not become too large each unit of a refinery, crude unit, hydrocracker, etc. are updated one at a time. After updating all the TARs, I will look at any w/w changes.

Next, I update several margins and prices files that we use daily and feed into other fundamental data sheets.

7:30 AM – 8:00 AM
Walk to Starbucks, chat with one of my friends on the desk, catch up on the weekend.

8:00 AM – 10:30 AM
Update historical and forward margins and look at the changes w/w for different grades and regions across the US. The US is split into five sections, called PADDs, and different regions use different crude slates, which can include crudes that range from light to heavy and sour to sweet. These differences in types of crude impact the cost as well as type of refinery that can run the crude.

Oil markets are traded with spreads to incentive storing your oil or moving your oil to a more profitable location (in oil markets intermarket spreads are called arbs, with the most well known the WTI – Brent arb, the most traded crude contracts). I update an arb sheet that looks at historical and forward estimate price differences between different locations as well as the freight cost between those locations to determine if any of the arbs are “open.” If an arb is open, the economics make sense to move the crude. Then, an owner of a VLCC (very large crude carrier of crude) cargo can elect to move the oil to the more profitable location.

10:30 AM – 11:00 AM
Shoot the shit with the desk. Talk about what new movies are out, what went on that weekend, new talent on CNBC, make me a market on “fill in the blank,” any other tangents we get into.

11:00 AM – 11:30 AM
Grab lunch, vent about anything that happened thus far that day.

11:30 AM – 2:00 PM
Once a month the EIA releases monthly data and we must update our sheets to incorporate this data. The EIA releases weekly data, but then there is a 2-month lag and a revised version of the data for the month. We look at any differences between the weekly data and monthly data such as production, demand, crude runs, imports, exports, etc.

2:00 – 5:30 PM
The days begins to wrap up and traders mark their books, PnL is run, trades are reconciled, and the trading day ends. Now is usually a good time to get some reading done which can consist of research from the banks, opinions from other funds, daily news from BBG/Reuters, updates from OPEC/EIA/IEA, several vendors we receive commentary from, and emails sent around the desk.

5:30 PM – Bedtime
Head home, take the dog out, hit the gym, dinner with the fiancé, catch up on some reading/TV.

Day 2 – EIA Weekly Data Release and Forecasting

For brevity, I won’t repeat similarities from the above day.

7:00 AM – 8:00 AM
Roundtable chat about the markets, what’s driving the macro picture, positioning, any data releases that week, any market events, news updates, market updates, etc.

8:00 AM – 10:30 AM
Look at the internal oil supply and demand balances. We break down data between monthly and weekly data as well as across products and regions. So broadly there are global crude, global gasoline, global distillate, European crude, Asian crude, etc. Analyze the past several weeks, y/y changes, trends or shifts over the last 5 years. Compare our balances to outside numbers.

10:30 AM – 12:00 PM
Update weekly numbers and look at our forecast vs. the realized numbers. What are the most important factors that week, what is the market focusing on, how are the next weeks/months shaping up.

12:00 PM – 2:00 PM
Talk with the research team and traders to discuss the merits of any large changes to the market and balances.

2:00 PM – 5:00 PM
Conduct any interesting analysis I’m considering at the time, answer emails, chat with traders about longer term project they want to consider.

Day 3 – Abnormal Market Events

All Day
On days such as Brexit, election night, OPEC announcements, etc. it is vital to be watching headlines and prices throughout the day to try to determine the actual news, changes to market dynamics, price and movements.

Feel free to ask any follow-up questions.

 

Thanks for sharing! Two questions from me: 1- Mind expanding on "Look at the internal oil supply and demand balances."? I often see supply and demand forecasting as part of job descriptions, but how does an analyst create his/her own view of actual balances? 2- You mention open arbs in the first day. In FX markets, arbitrage opportunities get eliminated quickly because of the prevalence of electronic trading. How often do arb opportunities present themselves in physical oil, and how much time do you have to seize the opportunities before various factors (basis changes, transport cost changes, etc.) close the window of opportunity.

 
Best Response
  1. For the most part a lot of the balances will be similar and it is only a few assumptions that will truly differentiate one balance from another. For instance, in the US the major focus for y/y growth in a $45-$55 oil environment is the Permian. Based on decline rates, takeaway capacity, rig counts, etc. will give you different outputs which can move your balance say 0 - 500 kbd. For an international example if you believe there will be increased sanctions with Iran, continued disruptions in Libya, and/or financial difficulties in Venezuela these will change your balance. It's a mix of art and science.
  2. In oil markets the term "arb" is a bit of a misnomer as it just refers to spreads. Arbs can remain open or closed for awhile because an open arb encourages moving oil from oil area to another. So the spread is a clearing mechanism for S/D balances.
 

I'll narrow it down to bank/trading house. Most people in a role like this would move to trading or want to move to trading, say 75%-90%. Some people stick around in the role and others move on to industry related positions. Background: have family in commodities that I was lucky enough to have exposure to in college, cold called alumni and became friendly with a couple of people. It's always interesting to me when you're supposed to give a "why this firm/group" in an interview because oftentimes the answer is BS and you just happened into a certain walk of life.

 

I am curious as well where you are as one of the other posters asked, bank/ trading house/oil major?

Do you look at the Brent/Dubai spread at all? whats your thoughts on it collapsing currently if you are? Why would any refiner want to purchase a lower quality crude (dubai) at a premium to brent if it is going to cost them more to produce the refined products?

Thanks

 

Trading/scheduling activity was estimated to produce $XYZ profit/loss over a given timeframe. Whatever system of record you're using says something different. You're tasked with figuring out 1) why they're different, 2) what the correct P/L is, 3) how to make your system of record reflect the accurate P/L. That's P/L reconciliation.

As an example, maybe I have stuff at a NYH terminal marking to a GC price, or someone on the ops end accidentally entered in 50,000 gallons instead of 50,000 bbls, or someone fudged the diff when entering swaps yesterday, or a trader accidentally executed futures in the wrong book.

 

i hear its exciting and profitable and magical and they pump the sweet black gold from the ancient dinosaur burial ground up to the trading desks which are high in a canopy of dr suess trees that block out the sun and constantly rain money

 

Quis id distinctio dignissimos aperiam sunt expedita velit. Illum et nemo ut velit sed. Qui deleniti cupiditate iste doloremque repellendus dicta unde. Dolore provident dolorem voluptas eligendi aut quo. Eveniet rerum reprehenderit eos doloremque neque ipsa et.

Aut odio et incidunt earum incidunt excepturi ut. Amet et aperiam aut doloribus sit earum. Est maiores facilis asperiores odit.

Aut voluptatibus error alias laborum sit id sapiente. Aut quia voluptates assumenda ad id natus corporis. Velit dignissimos voluptatem fugit ducimus molestias.

Et nesciunt in voluptas autem hic id provident. Aut voluptatibus minus et voluptas maiores blanditiis. Et rem suscipit dicta assumenda.

Disclaimer for the Kids: Any forward-looking statements are solely for informational purposes and cannot be taken as investment advice. Consult your moms before deciding where to invest.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (85) $262
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (65) $168
  • 1st Year Analyst (198) $159
  • Intern/Summer Analyst (143) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”