Q&A: Physical Oil Trading

Trader in S&T - Comm

I have found these forums helpful over the course of the past several years I've been on them so wanted to try to give a little back.

There is also a lot of very low quality information on here about how this business works and what trajectories can look like. I won't answer anything too biographical but I started at a major and have been at a few different shops, now trading at a large physical shop. I'll have to ignore inane questions or things that I feel have already been properly addressed but otherwise looking forward to providing some info. Please ask away.

Comments (95)

Jan 7, 2020

Are you bullish or bearish on the future of physical oil trading?

Array

  • Trader in S&T - Comm
Jan 8, 2020

Bullish for the standard reasons - anyone who thinks the oil business is going anywhere is delusional. Anyone who thinks trading is going to phase out has no idea of what it actually involves.

Of course markets get more competitive over time particularly as transparency and price discovery without having to participate in the market increases. There will obviously be changes in the regulatory environment as well as time goes on. I'm of the opinion that happening like this really just manufacture new opportunities and new markets that didn't exist before.

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  • Intern in PE - LBOs
Jun 26, 2020

Could you perhaps elaborate on what kind of new market or opportunities will there be?

Jan 7, 2020

Can you go into more about career trajectory that you say is misleading on here?

Most Helpful
  • Trader in S&T - Comm
Jan 8, 2020

There is a lot of sentiment on here that you can get roles that are EXTREMELY important to running a physical business very early on in your career. Granted, you can probably get jobs with the job title "scheduler" working at a pipeline or producer that doesn't really require any experience because the day-to-day doesn't provide much novelty. The reality is ops jobs are extremely difficult to get, there are lines out the door at every shop I've been at of experienced people who are high performers in their current roles trying to move into scheduling. Also, most people suck at operations in a commercially-spirited environment where things are constantly changing.

This is also true to a lesser degree with risk roles. Most junior level "risk" guys don't know shit and just float buzzwords out and reconcile spreadsheets. The reality is, unless you go into a rotational program you cannot expect to have much responsibility very early on. I know everyone thinks they are exceptional but the truth is most people are average or worse than average performers. Our heads of risk or ops or trading want to see that you can absolutely devour and produce high quality low stakes work before they feel comfortable entrusting you with more important parts of the business.

I spent years thinking I was months away from trading while having fairly objective evidence that I was a very high performer and it still took me much longer to get a book than I imagined it would when day dreaming about my hypothetical "trajectory" back in college.

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Jan 9, 2020

Needed to hear this. Currently in the trenches with the low stakes roles of physical trading in an ABCD grain house. Do what you're assigned well, and more responsibilities will come later on.

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Jan 7, 2020

How'd you get your first job in the physical trading space?

  • Trader in S&T - Comm
Jan 8, 2020

Felt I addressed this but I started at a major.

Jan 7, 2020

How much spec trading do you do specifically in derivatives, besides using them for hedges? The reason I ask is because Glencore wanted to grow their financial desk and hired Jonathan Goldberg many many years ago before he got let go. I know this former energy / power trader on the basis desk and when she left the physical side to trade financials at a MM hedge fund, she couldn't handle the pressure and got let go... if you trade paper, is it across the forward curve or do you trade that relative to the full barrel, as well? If you do spec, is it all fundamental or is it because you can see price relatively being cheap or rich based on your own technical or is it bit of both and what kind of PnL is expected day to day? And what is the holding duration of spec trades

She said she is not a good paper trader because she can't compete against algos and etc... which doesn't really make any sense given that her trades are more longer term due to exploiting relative value.

  • Trader in S&T - Comm
Jan 8, 2020

Lots of questions here - sounds like you are a pretty junior guy and no sweat, but these questions are kind of difficult to answer:

I am fairly new to my seat and my 'edge' at this point is certainly not in the futures markets so I will occasionally piggy back ideas I hear but I'm never fully comfortable with these trades, just very confident in the guys doing them and the fact I watch them put their money where their mouth is.

I don't understand the question about trading paper across the curve or the full barrel?

In terms of spec - you have a PNL and you either are doing things that make money or are doing things that lose money. I have a system to trade around but it's not like that system is guaranteed to give me money and I'm just getting paid to be present in an office (which I'll admit is what a lot of traders seem to get paid for). The market and your system can give you information and you try to develop this into a view.

Not going to disclose profit targets but I'm expected to reach them with day to day PNL within my VAR limits.

How long you hold it for depends on the trade but this is kind of a buzzwordy question that doesn't really make sense in the world of physical trading.

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Jan 7, 2020

I want to become a trader in commodities and I spoke to dozen of trader in commodities house.
So I've some question :
- do you work in a European trading house (Genoa, see traf, Glen, vitol...)?
- how often do you travel (it is seemingly paramount for building relationships)?
- do you have a book only reserved to speculation and another on basic exchanges /trade? I know a guy at noble group who have two books
- how did you become a trader (ops, log before or paper trader in a BB)
- what is the turnover on your desk?
- At what level can you be safe about your job, one trader said to me that an analyst cost 600,000 dollars and a trader $1m2 so if he makes a profit above that he's safe for the year
- Some trading houses use derivatives for hedging, others for speculating but in case of hedging, it is often the middle office which is in charge of hedging derivatives and not the FO : is it the same for your company?
- You must have positions or forage station near sensible zones and countries? How do you handle this? For example I know that uranium is barely exploited because it is a rare resources and only present in sensible countries like RDC and just few actors can use it (glencore e.g thanks to relations with government). So how do you handle it?
- What kind of internships should I do in order to enter in this world where everyone knows everyone (I network a lot) and offers are often no available one website (I've the database of all commodities house in Amsterdam and Genoa...)

Well that's it

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  • Trader in S&T - Comm
Jan 8, 2020

I'm sorry but these aren't very insightful questions and are quite biographical in nature. The extent of my biography I'm willing to detail is contained in the initial post.

As for middle office, they are responsible for monitoring and reporting your risk, you are responsible for managing it within your allowed limits.

I'm not sure I understand what you're asking, but I don't know much (or anything) about uranium trading and couldn't really speak to how it's handled and what needs handling.

This site has quality information on internships for this space. If you're actually interested, the sort of roles that might be good should be somewhat intuitive after doing your research.

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Jan 7, 2020

What geography do you trade? Were you on the wrong side of middy last year?

  • Trader in S&T - Comm
Jan 8, 2020

I'm sorry, but too biographical to answer.

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Jan 7, 2020

What is your relationship like with the charterers you work alongside and what are the qualities your favourite ones have possessed over the others (aside from cheap freight of course)

I'm a crude charterer (on the owner side) and curious what it's like for my opposite numbers, especially in the sort of market we're in now...

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  • Trader in S&T - Comm
Jan 8, 2020

I have no great love for ship owners but am of course cordial. Optionality and airtight ops/communication are the most important factors besides rates.

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Jan 9, 2020

I was more talking about your colleagues/the charterers at the majors/trading houses who I assume you sit with, rather than owners

Jan 7, 2020

What would you consider to be key skills to break into oil trading? Is it viable to do so straight from University?

  • Trader in S&T - Comm
Jan 8, 2020

Genuine interest, creativity, spacial reasoning, flexibility, comfort with change. I realize these are somewhat non-answers. Technical skills are always a huge value add in any enterprise.

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Jan 7, 2020

Walk us through a recent trade of yours.

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Jan 7, 2020

You always ask this, lol.

I don't care so much about his last trade. I care about his best trade or what his logic is putting on a trade?

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Jan 8, 2020

Best trade is not something I would disclose personally. Too many idiosyncrasies that make it the best trade.

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  • Trader in S&T - Comm
Jan 8, 2020

This is sort of a tough question to answer believe it or not. The physical markets have a lot going on. There have been some arbs open so just imagine any arb and you've pretty much got it.

Jan 7, 2020

Thanks for doing this. I'm going to start at a physical trading house (Cargill/Dreyfus/ADM/Bunge) full time this summer in the trader development program in ags. I was wondering if anybody you know has made the jump from ags to energy? Is this a common transition?

Jan 7, 2020

What is wrong with Ags? I know a few Ags trader who've worked at a commodity house and moved to energy, trading financials at a bank.

Jan 7, 2020

Compressed margins in traditionally big money making markets coupled with low volatility caused by over supply has been hurting bottom lines in ag for a while now. It also seems like books are smaller in general on the ag side than the energy side.

Array

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  • Trader in S&T - Comm
Jan 8, 2020

Can't speak to this but fairly common topic on this board. I don't want to dispense advice that I know nothing about. I think ags is pretty cool but have no idea how hard it is to make money - probably similar to how hard it is to make money in energy or any other product (hard).

Sounds like you're in a great spot. Just work hard and try to learn as much as you can.

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Jan 7, 2020

Where did your career initially start out of college (or high school) -- did you transition into trading right out of the gates?
How long did it take for you to build up your clientele?
What sort of educational background do you and your colleagues come from, e.g what are the skills you would recommend people study to make the successful transition into trading?
What sort of outside activities would catch your eye from someone trying to break in?

  • Trader in S&T - Comm
Jan 8, 2020

I think I addressed some of this already. If I understand your question, yes my internships and first role out of school were in the physical trading business but were obviously not trading roles. This takes years and years plus a lot of luck.

I would say standard educational background for most white collar jobs. This is an industry you really can't learn without work experience in it so hard to make recommendations. Try to lean as much about the markets and value chain as you reasonably can. As mentioned before, technical skills are always exciting.

I don't really see an outside activity that would catch my eye but not sure I understand the questions. Most people want to see someone who's performed well in an interesting role and can bring some skills and insight - I'm less interested in learning that you mountain bike or like to lift weights.

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Jan 8, 2020
Trader in S&T - Comm:

I think I addressed some of this already. If I understand your question, yes my internships and first role out of school were in the physical trading business but were obviously not trading roles. This takes years and years plus a lot of luck.

I would say standard educational background for most white collar jobs. This is an industry you really can't learn without work experience in it so hard to make recommendations. Try to lean as much about the markets and value chain as you reasonably can. As mentioned before, technical skills are always exciting.

I don't really see an outside activity that would catch my eye but not sure I understand the questions. Most people want to see someone who's performed well in an interesting role and can bring some skills and insight - I'm less interested in learning that you mountain bike or like to lift weights.

yes you actually answered my question within a previous response, thank you!

and as to the other bolded: I didn't mean activities that are for icebreakers, but more so what sort of things should people highlight in their past experiences in whatever current or past roles they're in (or if they're in school) that might be relevant in obtaining the first steps into a physical shop? specifically for a risk or ops role or any initial role that gives exposure to the business.

I wanted to ask this because it seems a bit of a catch-22 to get relevant exposure to the business of whatever commodity someone is interested in requires that initial first step, which requires relevant exposure anyways. Unless I'm misunderstanding the expectations in the business?

sorry, now that I typed it all out like that, I can see it is a bit of a vague question. I asked it a bit roundabout initially but the above is what I'm trying to ask.

Jan 7, 2020

Hi there,
I understand that its important to start out in scheduling or risk but not everyone becomes a trader. What are the exit opps for thosr in risk or opps?

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  • Trader in S&T - Comm
Jan 8, 2020

Please see above - you will likely not start in ops or risk unless it's a pseudo ops or pseudo risk role.

Also, this isn't really an exit ops business. Your exit opps would be to go somewhere else that will pay you more or you like the people more to do their ops and risk.

You obviously don't know shit about trading, but ops and risk aren't the traders slaves and trading isn't the end all be all. Most people think they want to trade but I really think a lot of this is due to the sweet job title and false assumption that traders make so much money because they get to trade. This is like assuming Mike Trout makes a lot of money because he gets to play baseball. Mike Trout makes a lot of money because he is good as fuck at baseball. Highly paid traders make a lot of money because they are good as fuck at trading. No one is going to pay you or me or even give us a shot at a role where we could get paid to play baseball because we don't show anyone anything to get them excited about our baseball upside.

I'm trying to not rant as this is a huge pet peeve of mine so in summary, there are no exit ops and ops is a sweet job that is high-stakes, fun, and pays a shit load - BACK TO RANT - AS IS ALMOST EVERY OTHER PROFESSION WHEN YOU'RE GOOD.

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Jan 8, 2020

What regions does your desk handle? Kinda curious because I know many commodities are largely untouched by the ongoing Iran thingy, though the straight of Hormuz has been essentially evacuated, so oil is definitely touched here.

  • Trader in S&T - Comm
Jan 8, 2020

I'm sorry but don't feel comfortable answering that.

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  • Analyst 1 in IB - Ind
Jan 8, 2020

Hate to be that person, but any insight you could offer on comp?

  • Trader in S&T - Comm
Jan 8, 2020

Hi - it really is hard to provide standard numbers - it is SO variable depending on where you are and what your mandate really is.

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Jan 9, 2020

Trader in S&T

First, thank you for doing this. It is very helpful for the newbies who troll this board and think IB is the only route for their success.

Second, before I get monkey shit thrown at me, I have three very close friends who started out in IB and are now retired, sitting on boards, angel investing, etc. They are very happy being "retired" after putting in 25+ years in the business. They took the route that most newbies on here want to emulate. To use the boards lingo, we all were top tier undergrad (HYP), all top 15 B-School grads and all of us started our careers at top BB firms (JPM/MS/GS) They went to banking, I went to the pits because I couldn't contemplate wearing a suit and tie for the rest of my life. They have retired and I run my own business.

Finally, I'll ask a question that I hope will spark someone on this board to follow the paths you and I have gone down (S&T) versus IB.

Question -- How many anniversaries / birthdays / school plays have you missed due to your job over the years and would you have traded more money for missing them?

Thanks again for posting this.

Namaste.

D.O.U.G.

  • Trader in S&T - Comm
Jan 12, 2020

I am quite early in my career and do not have the personal commitments you mentioned to miss. Having said that, I actually feel this is a fairly forgiving industry on that front and the work is simply awesome so it does not feel like a sacrifice. There is no doubt that I don't get to spend nearly as much time hanging out with my friends, particularly on week nights, that those in a slower paced industry get to and I need to be sharp throughout the week so I try to not do much partying.

One of the expressions I've heard is that traders with long careers make more money than brokers with long careers but there aren't many traders with long careers. A lot of guys will stay in a high personal risk role earlier in their career and then transition into management or a commercial type role at a refiner or producer. These sort of roles are lower stress in many ways and can provide a steadier income (and possibly better when risk adjusted).

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Jan 12, 2020

Can you elaborate on what a high personal risk role looks like?

Jan 9, 2020

I am currently a first year associate at a commercial bank, (24-year old, 2 years experience, front office) but have the potential opportunity to become a settlements analyst for rack fuels at a a major trade shop. Think of Glencore or Vitol. My ultimate goal is to become a trader, therefore I would like to get into a market analysis role, scheduler role, trading assistant role etc. Is this a good starting position, and what kind of internal opportunities would I get and what kind of external opportunities would I get based on being at a great shop like this but doing settlements? Will this position help me reach my end goal? Thanks!

  • Trader in S&T - Comm
Jan 12, 2020

Delete

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  • Trader in S&T - Comm
Jan 12, 2020

Be careful about how you phrase things like this - because you mentioned racks with those shops I know the exact two places it could be.

My honest advice would be to not take that role - that job will be HORRIBLY boring and you're not going to even be on the bench for an ops or even mid-office type role. Having said that, it does get you into the industry and you're still in a position where you could catch a break but it would not be at your shop. The big shops pay people a lot to be good at their jobs - majors and other shops pay you partly in cash and partly in development opportunities - the latter of the two is just not really the business a larger trade shop environment is in for with its employees. Those are the places to go TO once you are already doing what you want to do.

This goes back to something I think I alluded to - if you walk into a trading shop a significant portion of the people there are under the delusion that they are on their way to being a trader. This will just never happen for the overwhelming majority of them. Further, and this can seem arrogant, you will probably know if you are "one of those guys/gals" that might get a shot, probably in pretty explicit terms from the traders and management. There are some names at my current shop that still aren't near the stage of development they need to be at to trade but I have the sentiment that if they stick around and continue to produce quality work that giving them a shot could pay off. A lot of these types I like to try to spend time with and at least tell them how I approached things in my career and help them understand how we're going to hopefully make money by doing what we're working on. There are other people who I feel like "could" get it because they produce quality work but I'm not totally sure what their aspirations are. These are the type that I think could benefit from some internal networking and stepping up on some ad hoc type projects. Another type (fairly high percentage) are those that I know are interested but I just don't think particularly highly of and could not in good conscience support even if I like them personally and try to keep them motivated. This is probably the most annoying type as I feel like they try to speak to me in "knowing" ways and speak about themselves relative to the obvious underachievers like we're in on some joke together. This is probably your standard average employee at a lot of enterprises who of course want to make more money but don't seem to understand that they are getting paid to do the shit thats asked of them timely and correctly and it isn't really deserving of accolades or advancement opportunities at the level they feel their entitled to simply for doing their job satisfactorily.

Side note on this, could just be personal preference and not any kind of physical trading advice, but nothing annoys me more than people talking about how long of hours they are working and always having someone or something to blame. The people that are well liked are the types that despite these sort of excuses possibly existing, somehow manage to miraculously get it done and don't expect anything more than a paycheck.

I can feel this devolving into a rant so I'll bring it back together. With your experience, I think you could do better than settlements in terms of finding a way into the industry in a role with more visibility and more engaging work if you are patient. HOWEVER - everything is about risk and if you are interested in the business and want to bet on yourself to out-achieve the lot you're given, it definitely puts you closer than you are now, but if you were my cousin or friends brother I'd probably say to keep looking. Feel free to post in here again even far into the future if you find another role and I will respond

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Jan 12, 2020

I definitely will. That was an amazing/well thought out response. I greatly greatly appreciate it.

Jan 13, 2020

Can you PM me? I would like to discuss this further. Thanks

  • Prospect in Other
Jan 9, 2020

How has the industry changed since you started? Is the trading become more quant based like other forms of paper trading or is it still highly relationship based?

Thanks in advance?

  • Trader in S&T - Comm
Jan 12, 2020

I feel I've addressed this in generic terms already. There are more market participants and better costless price discovery all the time. I'm sorry but this is not a very good question, I'd appreciate a little research on your end.

Jan 12, 2020

Do trade shops tend to hire traders from within or from outside? Asking as an incoming graduate program analyst at a large trade shop.

  • Trader in S&T - Comm
Jan 12, 2020

Really depends on the shop. You really have to think about what each place is going to look at in their KPI's. In certain instances, it's best to probably reward a hard worker with the job on the pretense that the asset does the all of the hard work and you need someone to manage it and be creative within the defined scope of the business. If the book prints $100mm a year and the personnel can take that to $101mm with a high performing scheduler/analyst versus 98-110mm with an experienced gal that takes more risk, I'd be inclined to say they'll go with the former and be happy with the $100mm (in an organization that size with a system that facilitates that). I think it's a really different thing than a book that is looking to take money out of the market and makes/loses $0 without anyone, loses a bar and makes up to 5mm with a new guy, or loses 5mm and makes up to 25mm with someone that's shown they know what they're doing.

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Jan 13, 2020

Thanks for doing this AMA. Lot's of good stuff throughout.

  • Prospect in Other
Jan 13, 2020

Which products are you bullish and bearish on in upcoming future / which products would you suggest for someone just entering the industry?

  • Trader in S&T - Comm
Jan 14, 2020

Bullish or bearish from a career standpoint?

Whatever you are interested in. There are lots of products that don't really interest me or suit my skillset but that doesn't mean there aren't guys that trade the hell out of them. I'd probably say just wherever you can get on a desk that interests you balanced with who you'll be learning from. To give an example, I don't find natty even remotely interesting whereas I feel like things like coffee and sugar are fascinating. Having said that, I would rather go work for a badass natural gas trader that I could really learn and develop under versus a coffee trader that basically amounts to a marketer/distributor. These aren't perfect examples because I don't know much about either and there is extreme nuance to every circumstance, but I think it kind of gets the point across. I would not gun towards a product based on what you think the market might look like in X amount of years and certainly not write one off if you have good guys to go learn under. By the grace of God, markets are constantly changing and you don't sound like you're far enough along in your career to ride or die for a certain product.

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Jan 18, 2020

What are your best resources for trade ideas? What's the most important tool you use?

Consumption smoothing is retarded. If you stay in this game for a handful of years, money will be the least of your worries. Live it up, because this is the one time in your life where you might actually have time to spare.

  • Trader in S&T - Comm
Jan 18, 2020

I started writing a long response about my process and then deleted realizing I wasn't quite answering your question. At the same time, my process is my resource (which is a constant work in progress). I've talked to people in the past (mostly poser types) and even read a few posts on here that people think there is a publication they can read or a magical model they can build that tells them what they should do. This is possibly the dumbest thing I've ever heard in my life.

Very lame analogy but my idea generation process (albeit for a very different type of market) isn't altogether different than the process you see the different teams go through in the Big Short film.

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Jan 19, 2020

Thanks for the insight. What's been your biggest lesson so far?

Consumption smoothing is retarded. If you stay in this game for a handful of years, money will be the least of your worries. Live it up, because this is the one time in your life where you might actually have time to spare.

Jan 18, 2020

Do you think S&T/ Trading is still a good long-term-career? Why did you choose Trading over IB?
Is there a future for non-quant shops?

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  • Trader in S&T - Comm
Jan 18, 2020

IB was never in the equation nor is it considered an alternative to a physical trading role. I would not do well in IB. I've also addressed my views on physical trading as a career. Please do research or at the very least bother to read the replies in the very thread you're writing in before creating valueless posts.

Posters like you are why AMA's go to shit and often provide no value to the type of people I am trying to help with this AMA.

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  • Prospect in IB - Gen
Jan 27, 2020
Trader in S&T - Comm:

How are your hard skills? I'm trying to think of how we'd use a guy with your background and nothing is popping out to me. Maybe if you have some interesting ideas of how to look at things? Also, I'd assume you have some kind of risk tolerance.

What do you mean by hard skills? Also, when you say interesting ideas of how to look at things is that for specific actionable ideas or in general?

Jan 20, 2020

Thanks for doing this AMA. Couple questions, answer as you please I guess:

  1. What advice would you give to someone looking to break into Physical Oil trading that has already graduated university and has experience in a Fixed Income role for 2 years? Should I be reaching out to recruiters? I know that Trafigura has just posted for its Global Trader program for experienced traders.
  2. What resources outside of Oil 101 do you recommend to traders to understand the Oil market better as well as trading Oil Derivatives? Is Oil a very macro-oriented product or can it be very technical like Nat-Gas?
  3. How much has data science creeped into the Physical Commodity space? I know Commodity Derivative hedge funds have begun using data science to gain an edge, but so far, not much luck. Will interpersonal skills always be in demand for a role in Physical Oil space?
  4. Traders like Andy Hall have come out and said the glory days of physical commodities trading is over now that China has begun shifting from an Industrial economy to a consumer-based economy. Do you foresee another commodities super-cycle in the near future? They say the cure for low prices is low prices.
  • Trader in S&T - Comm
Jan 21, 2020
  1. Most of the guys I work with started in physical trading but I know this move happens from trading another product like this and moving over to commodities. You're probably a smart guy so will pick up the physical quickly but it does take time. How are your hard skills? I'm trying to think of how we'd use a guy with your background and nothing is popping out to me. Maybe if you have some interesting ideas of how to look at things? Also, I'd assume you have some kind of risk tolerance.
  2. Natural gas has close to utter transparency so it's quite technical. This is really all dependent on style. It's harder to get good information on oil so its basic economics combined with knowledge of logistics on making call. As far as resources, nothing can really show you how the market functions so I'd just read the basics. RBN energy has some good stuff but can get really granular and kind of boring.
  3. Creeping in but really, really excited about what it can provide.
  4. I don't make calls like that. The world is just swimming in oil right now. The thing that kills markets are not having dislocations. As long as there are net producers and net consumers someone will make money,
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Feb 1, 2020

As a ex-rates turned energy guy, can I ask why you are leaving fixed income?

I'm a quant strat on an energy trading desk and everyone is starting to invest in systematic trading

Array

Jan 27, 2020

This is a great AMA -- i've been in the industry for a couple of years now, and am hoping to jump into a trading role within the next 3 years... goal at the moment is to get as well rounded as possible, essentially having a really good understanding of the entire lifecycle of the trade.

I personally think it'll set me apart from the rest of the pack, but also give me a lot of other "exit opportunities" if down the road i realize that trading isn't really what i want to do.

You might've answered this already but -- in general, where have you seen young guys get onto trading desk? Big, mid size or smaller shops?

  • Trader in S&T - Comm
Feb 1, 2020

Good strategy and really pleased to hear a degree of patience, you sound like a level headed guy/gal. I'm hesitant to say having a time specific goal may set you up for disappointment BUT, as with many things and life, timing and chemistry (sometimes DESPITE aptitude [although not likely at great places to be]) are so important in a career.

There is actually quite a bit to unpack here and I'm trying to think of how to structure this.

First off, check my above post about the majority of people in a trading organization thinking they may get a shot. I think a colloquial way to put this in an encouraging light is that although ANYONE has a shot, that doesn't mean EVERYONE is being considered for one. To me, knowing exactly what is going on in parts of the business that influence trading calls selects the anyone from the everyone. The good news is that LOTS of areas of the business influence trading calls.

Stick with me here - it's my view that the trader needs to be highly skilled at all of these functions. To go further, I think the trader should expect themselves to to be conceptually better at these functions than the person doing them. Extraordinarily dark example, but I think of Oona Chapman in the Black Mirror: White Christmas episode:

https://www.youtube.com/watch?v=OZyzfnZVCCk
The "real" Oona Chapman has other stuff to focus on apart from orchestrating the perfect morning routine, but if she were, as a third person (which she is), good God is it flawless. That is how I view mastery of the other functions. If you had the time to focus on the minutiae of everything, you could do it perfectly because you know exactly how it "should" work. Now just imagine instead of a morning routine, what is being co-ordinated is a trade lifecycle.

Now to tie it back, when you say understanding the trade life cycle will set you apart from the pack, I disagree. I think it baseline qualifies you to be in the mix. Really sorry for the gratuitous Black Mirror thought experiment analogy, but the advantage of a third party version of ones self planning ones day resonates very strongly (this is a fantastic and hugely popular episode). By the same logic, it stands to reason that the complete understanding of executing what you have decided is a good day should also go into what you have decided is a good trade.

My point is that you need to be well rounded and have a complete understanding of everything that affects your books PNL, but, I'd hope that you view this as an expectation rather than a distinguishing factor for allowing you to risk and potentially lose MILLIONS of dollars of money that isn't yours.

As for shop size, hard to answer. I'd encourage you to view this as "where are there seats that I'm qualified to take". Since you're looking to get into your first trading role, you're going to need to land at a place that either has small books OR large books that need or want juniors. You're best scenario would probably be finding a profitable larger book that can take you as a junior to run a part of a business. The reason majors are good is because people can move off of a profitable desk to a new role but still be within the organization. Similarly, medium and larger trading shops are lean and get stretched thin so sometimes have needs for younger guys to come in and build/optimize within areas of a business that are already profitable. These are good places because seats on good books open up and the personal and institutional knowledge that made the book profitable didn't necessarily leave to give you your seat. Other scenarios that still give you a shot but less of a chance of success is someone leaves and there's an existing vacancy which is a different circumstance from what I'm describing above about medium+ shops. People normally leave a seat for two reasons - they either lost money or they made a lot and think another shop will let them have more of it. In the former scenario, you kind of want to hope the guy blew up from having too much risk versus being a shitty trader. Reason being, if he just got fired for being shitty that means the knowledge on how to make that book profitable probably isn't there yet. In the latter, if that guy didn't leave you some neat toys or institutionalize his knowledge, you'll need to rediscover how he made money. Kind of a moot point, but in any scenario you still need to find new ways to generate positive PNL.

    • 6
Feb 3, 2020

This was a perfectly laid out answer, and i really appreciate you taking your time to do reply. I like seeing responses like this because it actually generates actual conversations and gives the younger guys such as myself guidance.

As for your comment about understanding the lifecycle of the trade -- i do take it as an expectation and not a distinguinshing factor.

Furthermore -- what has been your experience with the "Fuel marketer" shops i.e. shops with street level gas station (excluding the majors). From what i've seen a lot of them are really only focused on "supply trading", which makes sense but do you know of any that are taking on more speculative positions? Let me know if this question makes sense, i can make it more detailed if need be.

Jan 31, 2020
  1. You seem very optimistic aout the future of the oil indusrty. Well idk about that one. Here in Europe everyone wants to ban fossil fuels. Also, everyone is pumping oil like crazy and this is not going to change anytime soon. Your opinion about these topics?
  2. How much do you make? How much is the ceiling?
  3. What do you think about LNG?

Thanks for being real and letting people know they are not special :)

    • 2
  • Trader in S&T - Comm
Feb 1, 2020

Dude I'm going to be honest with you, I just read some of your other posts and you sound like an absolute bonehead. Your questions shouldn't even be dignified with responses because I've already addressed all of them except for #3.

  1. I made no predictions on the oil industries performance as a sector but I am a very strong seller of anything meaningful happening. Climate change advocacy is a feel good ideology that I think can only be afforded by people who have discounted to 0 what devastating and likely impossible legislation would cost them in income and quality of life. If you feel you've caught something everyone else in the market seems to have missed, why don't you sell every long dated gasoil contract you can post margin for. My opinion that I've already stated is that the oil business is here to stay until we reach singularity. I think your conflating trading with oil production so I'm not sure on how to respond - you describe two (what you think are) pending volatility scenarios. What is it that you are contending with this? That they will not be good trading opportunities? The very fact you think that I'm wrong about something means you have someone to take the other side of the trade and we can't both win. Markets need guys like you in them.
  2. I've addressed this and you've clearly not read any of the thread.
  3. Can you refine this to an answerable question? I'm really not a big follower of LNG so I don't have a real strong view on it. My view earlier in my career was to avoid that desk because I felt the production and logistics limit the market participants too much to have it traded in a way that would interest me. It sounds like lots of people made a fortune in LNG this year though. I really wouldn't put too much stock into the few thoughts that I have on LNG.
    • 4
Feb 1, 2020
  1. So cutting 40% of the oil demand just because EU (the biggest market in the world) and possibly US (after the elections) want to be green does not affect the oil industry? OK. I dont remember saying the oil industry is dead. More like, the oil industry is going to shrink in the near future. The 40% is gasoline for cars that will be electic by 2050(?). The 60% is unreplaceable ofc.
  2. You clearly did not give any info about comp. Like, "i made Xk this year". Its a straight forward question. You didnt mention the company you work for so you are safe. One of the main topics of AMAs in this site is the comp. It is what is is. Also, you could mention what other (more senior) traders make just as an example so people can have an idea. Idk why this is so difficult for you. Its the most simple question really.
    • 1
  • Trader in S&T - Comm
Feb 1, 2020
  1. If your question is would a hypothetical reduction in demand be bearish for prices and companies who's margin is a function of flat price, the answer is yes. Producers margin is a function of flat price. Bearish flat price is obviously bearish for producers. Generally, a trading operations margin is not a function of flat price. Therefore, bearish flat price is not necessarily bearish for a trading operation.

Does this establish that we are talking about two separate things that perform on two different functions.

To the question of the overall size of the oil market, I happen to be bullish. I already stated that I doubt "wanting to be green" will have any teeth when the rubber hits the road. Further, the developing world has a long way to go from pyrolysizing tires to power Vespas to having an electrified vehicle fleet with the infrastructure to power it. That is my view today on the developing world which is what will account for the growth.

As for the developed world, I can't yet see a way to meaningfully reduce fossil fuel consumption in a way that will not destroy the economy and all but they very rich's standard of living. I am optimistic that we'll find ways, potentially through battery innovation, that can eventually help us reduce fossil fuel consumption but I don't feel this is in the "near future". Also, recognize that when this transition hopefully takes place, it will be gradual. My view today is that we will see demand destruction driven by innovation but I avoid saying what the timeline would look like. If it's as soon as you think it is, I think you'd see a shift in refinery kits as gasoline basically becomes a residual as it was in the business's infancy. You must recognize that for countries with very low standards of living, IE, most of the world, this would be an ENORMOUS incentive to never innovate past combustion. I'm sure you can appreciate how academic the discussion becomes once you start introducing assumptions that aren't supported by any actionable evidence. I suspect you aren't, but you might be a smart guy who's spotted something that experts haven't. However, the points you bring up aren't things that anyone is unaware of and the market, as far as I can tell, is discounting them.

  1. I clearly stated that I will not be answering questions about comp. I feel how much I make is irrelevant to how much anyone else can make. However, to satisfy your question since it is highly personal, I would say your expected comp from oil trading is likely zero because I do not think you could get a job. If you could get a job and eventually a book, as a trader base salary could range from 45k to 250k. I would say for someone with a tenuous grasp of basic economics (such as yourself), that salary range would likely be the ceiling as I could not imagine them making any money. Of course for someone who could, their ceiling would exceed that salary range but I'm not sure what it would be.
    • 4
Feb 2, 2020

https://qz.com/1341155/nine-countries-say-they-wil...
BUT, as the article says, no laws have been passed yet and that makes you right and me dumb.
HOWEVER, this is clearly the trend and nobody can deny that. Its like being in the 90s and saying that mobile phones wont become popular.

I would assume the bonus is equal to the salary for a capable trader?

Feb 2, 2020

Hi, I am a new member of this Forum. I'm.an Italian investor and I am worried about the performance of oil stocks. Do you think the current situation for oil companies could be worse than 2016? Would you recommend selling my oil shares at a loss? Thank you in advance.

  • Trader in S&T - Comm
Feb 2, 2020

I don't know and am not qualified to answer. Thanks.

Feb 4, 2020

Not sure if this is still active, but I have a couple of questions.

I'm currently in a mid tier shop in Asia trading agri, and I am having thoughts of switching to a ops or risk role in o&g. I'm still just starting out in my career, and I'm still unsure about whether agri would be the place to be. I know that you are bullish on the oil business, but I would be keen to get about your perspective on the agri side of things.

As you have mentioned in your earlier post, I understand that people seldom end up as traders from ops or risk type of role, and I do not have any delusions about it, but if I were to be able to choose, what oil product would you recommend for someone just starting out in the industry, to work his way up with?

  • Trader in S&T - Comm
Feb 4, 2020

Hi - I don't have many thoughts on ags other than thinking the soft products seem interesting. There seem to be a fair number of threads around this board discussing it that I hope can provide much better insight than I can.

I know I sound like a broken record - but choose something you're interested in.

Feb 4, 2020

If I start in the structuring / origination side of the business, could I transfer to a trading role? I believe my responsibilities would be working with the originators to help model out the off take / VPP / working capital facilities to secure future output for the traders.

I am currently in investment banking, typical product group.

  • Analyst 3+ in HF - Other
Feb 4, 2020
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Feb 4, 2020
Feb 5, 2020
  • Trader in S&T - Comm
Feb 6, 2020