We hear a lot on this forum about S&T at the large banks. I'd like to hear more information about what energy supply and trading careers are like at the supermajors (BP, Shell, Mobil, etc).
How do they compare to BB S&T in terms of the actual job, necessary background, career path, wages, lifestyle, and exit opps?
Bump, very interested as well
I haven't worked at both but I have worked at a large physical trade shop and know quite a few people at a couple banks.
In my experience, the trade shop/major vs a bank is going to pay you less on the front end, you are going to work less hours, and you are going to have a longer road to ever trading a molecule. You commonly hear stories of someone either never making it to a trading seat or it taking 3-4 years. And to get that trading seat they had to spend 3 years at a major and then jump ship to a smaller shop somewhere. The big upside here though is that later in your career you have the chance for some serious pay days. Also, the skills you learn in your training are more transferable to somewhere else in the energy industry if you end up not becoming a trader e.g, if you work in scheduling you can switch to a producer and help market/schedule their production, if you get trained in risk management you can transfer to a trade shop and help with that, if you are an analyst you can jump ship to any research group, consulting, producer, midstream company, etc.
As for the bank, you are going to be overpaid to start (my offer was 85k plus bonus, which in a good year I was told by my friend there could be 80% of your salary), you are going to work 12-13 hours a day, but you will be actually trading much sooner. The downside here is that your skills aren't as transferable as someone that has managed the entire supply chain of a product plus the trading aspect of it. And on top of that, you are most likely not going to make as much on the backside of you career vs. someone with a seat at a major/large physical trade shop.
Correct me if I'm wrong here but I also thought most commodity trading at Banks was just be trading derivatives on behalf of clients to facilitate hedging, etc. Not many are actually trading physical or taking speculative positions, is that right?
That is correct.
Really the only way to trade spec at a bank is "anticipatory hedging." e.g I think tomorrow that a lot of people are going to call me up and want to buy some crude futures from me so today I go out and buy them to be ready. Tomorrow comes and the market is up $1.00? Oh, time to sell those futures I bought to the refiner I was expecting to come to the table.
Partly correct. It will depend on the commodity. I can speak to Gas. Many of the banks involved in the market will engage in physical gas trading to various extents. Macquarie and GS market more gas than many producers, just let that sink in... Some banks also have small physical presence in markets where they have some kind of edge (some banks have a financing cost advantage over other players by virtue of being a bank). This phys presence will make them money. Most $$ comes from making markets for clients looking to hedge. As mentionned above, there's also some pre-hedging but I havent seen much of that in my experience.
Certain banks do take spec risk, pretty significant in some cases. So, you will look to hedge client (producers and consumers) positions, but your book will often have a certain net exposure in some products. This "exposure" is where spec risk comes in as you position your book to profit from certain trends. You can imagine if you're at a top bank, the amount of client flow means you have a pretty massive book, and in turn you can make sweet dough if your book is positionned in line with ur views and ur views are right.
Pay at the banks at a junior level is pretty sweet...youll make more $$ than anyone else your age/experience lvl in the industry for the first few years. Going the phys route is still better long-run IMO, but you still get some good skills learning to trade at a bank and get good exit opps down the line to go to HF or paper book of a phys player.
First of all is important to distinguish between physical and paper.
Career Path in those firm depends on the firm itself.. While some let you "trade" from the very first days, other put you in market risk or in shadowing position. I think BP's program is one of the best, under this point of view
Hours depend on what you trade and in which hub. A trader in Houston finds difficult to manage "normal hours" if it has to deal with the Asian market or Asian vessels
Pay is more about your P&L, but is important to distinguish between Physical or paper trading.
Lifestyle is cool, though also this depends on what you trade
Exit opps are trading in prop firms, banks, funds, commodities house (Trafigura, Glencore, Vitol etc.)
Ngl I think that Energy Trading is way more exciting than Equities, also under the structuring point of view
The majors you listed are mainly trading physical volumes and managing their respective derivatives books. The banks have largely sold off their physical trading desks, sans a few hold-outs.
Lifestyle is great. You won't work more than 60 hours a week, weekends off. The traders have strong personalities but you don't meet as many "I'm the alpha-male" types as you would at an investment bank. You benefit from all the perks of a large company, but working for a supermajor becomes political after a point, the same way it would at a bank. Expect plenty of mandatory HR trainings on ethics, workplace harassment, etc. etc... I know guys who left gigs in GS Securities, MS Equities, asset management and prop trading to work for a supermajor.
When you have upstream operations at the scale that these guys do your role becomes more supply & origination than it does trading. You have a lot of natural expo that has to be hedged and sold, any position you take is a relative long/short compared to where you would be naturally. A lot of the job becomes just understanding the nomenclature and contract terms for selling some of these products - not exactly a transferable skillset. You do have an incentive to follow the markets closely, but a lot of market news just doesn't affect you like it would on desks like equities, rates, etc. The big questions you end up asking yourself are "Where is supply? Where is demand? Is there an arbitrage opportunity to meet that?" rather than looking for true profit generating ideas.
Exits ops are cultivated on your own. I know a guy who went to Citadel Commodities after some time at a reputable physical trade shop. I know plenty more who ended up back or mid office oil trading, because they didn't get a trading job at the end of their supermajor development program. That sounds pretty scary because at that point, you'd be pretty invested (3~ years) in the oil industry.
Source: I interned in the industry, had an offer to return, ultimately didn't.
Secondary source here but a friend of mine interned and then accepted full time at a hedge fund subsidiary of BP prop trading oil. Kid was one of a few people in the school with an energy major (doubled with finance) and hes a genius.
Said he was making BB S&T money on 55-65 hours a week in Chicago and absolutely loves it FWIW. Also said the interview process was much easier than BB S&T as far as the finance portion goes, just needed to understand how oil is sold and moved around etc.
Does anyone have insights on Freight Trading? I'm guessing it's only done by majors and trading houses. Would love to know more about this desk since it's not widely discussed on this forum.
The main role is securing freight for their traders and chartering in vessels to move their own cargoes. Charterers will need to have a good idea of upcoming freight requirements from their traders and closely follow the freight market to get an idea of current levels, what vessels are where, where the market is going etc. all done by constantly speaking to shipbrokers and charterers (owner side) throughout the day. As well as this, a lot of the shipping desks act as their own profit centres and have the ability to relet and take vessels in on timecharter to trade them on the spot market, effectively doubling up as both an owner and a charterer.
On the opposite side you have the chartering desks at the shipowners who will be doing something similar - trading their fleet on the spot market for cargoes from the majors and traders. Again, constantly speaking to brokers and charterers to get a feel for the market. Good relationships are key on all sides. They will also be looking for opportunities to timecharter in vessels (or out if they are looking for fixed rate coverage - this is where the majors and traders can come in).
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