How to break into oil trading?
Masters Student in Finance here, have internship experiences in corporate treasury, trading FX, and fund management.
My FX Dealer senior tells me that the FX market now has lower margins and is more competitive because the FX market is now more transparent. He asked me to consider oil trading. Another friend of mine at BOAML also said that oil trading is a good path and that oil traders have a good lifestyle plus high pay. He had gone through a short stint at the oil trading desk as part of his graduate program.
I thus applied for an oil trading internship this summer. I applied for big companies like BP and Shell, and they are still processing my applications. The smaller firms were faster in getting back to me. They said that my experience was irrelevant. I tried to explain that my trading skills and finance background would be useful, but they said they do more than paper trading as they took charge of the physical oil delivery as well. In summary, I sounded like a noob.
Hence does anyone know how I can craft my paper trading experience to be relevant to their oil trading operations? If not, besides reading up on oil trading, what can I do meanwhile this summer to be on track towards an oil trading career? Any other firms I can join that are related to oil trading as well?
I tried looking for more information on oil trading on the internet but could not find much information for breaking into the industry. Most forums like this were more focused on getting people into investment banking.
Would appreciate any advice given.
Many Thanks.
Scheduling.
can elaborate more?
Sure. I'm not really an expert, but on the physical side it's extreeeemely important to understand how it all actually works, from production to transport to storage to refining to etc etc etc. That being said, many firms will have you rotate around on the different desks that do those things to ensure you have a solid understanding of these areas in order to prevent you from making a mistake that could cost you a whole lot of money. Many of the trading opportunities on the physical side come from things like "oil is cheaper in Country A and we can ship it to Country B and make a profit" or things of that nature. Or store it for awhile, etc.
So to break in, I would imagine applying for one of these roles would be better, rather than directly as a physical trader where you need this prior experience.
do you know the the paper/physical distinction? If not, I would fix that first.
any advice on fixing that?
For a good primer, Oil 101 by Morgan Downey. Teaches you the gruff (exploration, extraction, refinement, capacity, fracking, etc.). Once you understand the delicate chain of events that carries oil from ME to your SUV, you'd be able to make more informative trading decisions.
Thanks I just ordered the book!
Everyone recommends OIl 101. I'm sure you can find a torrent on the PDF of it. Also, here is a rather new one to come out on oil pricing
Understanding Oil Prices-Salvatore Carollo http://www.amazon.com/Understanding-Oil-Prices-Markets-Finance/dp/11199…
[quote=Revolution]Everyone recommends OIl 101. I'm sure you can find a torrent on the PDF of it. Also, here is a rather new one to come out on oil pricing
Understanding Oil Prices-Salvatore Carollo http://www.amazon.com/Understanding-Oil-Prices-Markets-Finance/dp/11199…]
will look into this bk after reading oil 101!
What exactly do the physical firms look for in recruiting?
Knowledge of whatever that physical is, aside from the usual things.
how do i gain that exposure? If say I read oil 101, can I write that in my cover letter or Resume?
network network network. Apply for majors/supermajors as many physical traders have worked their way up from ops.
what are majors/supermajors?
work up from ops? so as opposed to Investment Banking which Front Office bankers look down on people with ops experience, ops experience in physical trading is infact a plus point in physical trading?
Pretty Much
Ops experience isn't a plus point--it's pretty much required to be a good physical trader. If you don't know the physical logistics of your product (rail, pipeline, barge dock spaces, etc) you won't be a good trader. Keep in mind that going from scheduling -> trading isn't guaranteed. Get a scheduling job and kick ass at it. Hopefully someone will notice.
Very few physical trading shops have direct trader programs (Trafigura, BP, Noble or other majors might have graduate rotation programs) but in general NO physical shop will let you trade physical without a stint in scheduling, traffic/operations, deal structuring and/or risk.
With that said you'll want to get any position relevant to the oil desk and work your way up. Scheduling/operations would be ideal since you would be in constant interaction with the traders--you definitely don't need an engineering background for operations. You just need to be able to think creatively (barges always have their own damn problems) and have poise under pressure.
Network, network, network.
Thanks, I was thinking of entering commodities trading and get involved in the physical shipping process, so that I can get closer to the oil industry too. What do you think?
That's pretty much the standard way to break into energy trading. Go for it.
There are a number of good trading shops across the country, some of which specialize in one product or another. Traders tend to have much shorter hours than their Wall St counterparts, but there are a limited number of available spots. Most traders have to go through Risk Management and Scheduling jobs to get to that position. You'll need to make sure you understand arbitrage, blend models, and the broad spectrum of products, as well as refining processes. Check out "Petroleum Refining in Nontechnical Language" by Leffler. My old traders swore by it.
Outside of the majors, you should also look for jobs at companies like Trafigura, Noble, and Glencore if you want to work with major arbitrage opportunities. There are some interesting smaller traders out there as well, like SC Fuels and Gulfstream. All refiners and airlines also have trading arms, so keep them in mind.
Breaking into Oil Trading (Originally Posted: 02/04/2015)
About me: - Recent UChicago graduate w/honors Economics.
Currently - "Trading Assistant" Market Making in S&P derivatives.
I want to break into commodities. I currently work as a trading assistant for a market making firm in chicago, specializing in S&P derivatives. Market making is a very specialized niche, for the trading strategies are often difficult to apply to anything outside of market making. Basically trading IV and managing greek/inventory risk/paper flow analysis (skew).
I have read Oil 101, "The Prize," and "understanding oil prices" by Carollo. I have a decent understanding of oil markets (upstream & downstream), very basic trading strategies, and follow oil news daily.
I am confident I could do the work, the problem I have like many others, is breaking into the industry. My biggest disadvantage is lack of experience, as most candidates come from a background in energy industry. What can I do to stand out? Is it just a matter of continuing to learn and read? Or is there something in particular I should be focusing on?
Thank you for comments.
Very interested in hearing some responses to this. Hopefully someone can help you out!
Path to Junior Oil Trading? (Originally Posted: 10/27/2013)
I'm currently a 5-year experienced power trader (phys and fin) looking to segway into a Junior Oil Trader role with a local Houston firm (i.e. Shell, Exxon, Etc.). I also recently earned my MBA from Texas A&M. What is the most likely route for me? Crude Accounting? Scheduling? Or is there a chance at getting a direct hire position with training?
Regards!
Pm me
Hi monty09,
I'd like to pm you but I am not able to since my account is still new (I need 10 "banana points" to PM anyone). Could you perhaps kindly PM me to open the communication channel?
Regards.
Interested in trading Oil/Gas (Originally Posted: 02/04/2010)
Can anyone point me in the right direction to start learning?
http://www.amazon.com/Oil-101-Morgan-Downey/dp/0982039204/ref=pd_ts_b_3…
Agreed with above. But that book does not have enough material on the financial side of commodity trading. Trading Natural Gas by Sturm is good. Like some other traders once told me, you should start trading as soon as possible. It's kinda late for me, as I just started last year. So I didn't get a internship in S&T in my junior year.
But what the hell, I am doing my master in Math for an extra year. Hopefully by then I can get a job as a assistant trader.
agreed, but think this is a good read which helps you understand the product. always important to know what you're trading before you actually trade it.
I can second that the Sturm book is pretty solid, I've read some of it and its good stuff.
I don't know if you go to a university that was invited but the CME trading challenge is in about 4 weeks. Its for grads and undergrads and you trade gold and crude futures for 2 weeks before a final round of 2 more weeks.
This would be a good learning experience.
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