Discover a Career: Life as an Energy Trader
Oil and gas market is in a new era of volatility. The price of crude is being affected by several factors ranging from geopolitical developments, technological breakthroughs, short-term market news and most recently the trade war between the US and China. Several oil and gas producers therefore have well established trading departments that manage pricing risk across the supply chain—from crude oil supply, to term and spot sale.
In this segment of Discover a Career, we talked to Emily Doyle, who works with Shell as a fuel oil blender & commercial operations analyst to learn more about her role, responsibilities, and experience as an energy trader. She also shared how strong analytical skills and operational knowledge can be a plus to succeed in this business, contrary to the common misconception that a degree in finance is a must to be an energy trader.
Emily Doyle manages the fuel oil blending and commercial operations for the New York Harbor at Shell Trading. Before her current role, she managed commercial operations for the West Coast as well as for Latin America. Doyle has several years of experience in business development, investor relations, and investment banking. She holds an undergraduate degree in organizational behavior and management from Brown University, and an MBA from Rice University.
Describe a typical day in the life of an energy trader.
One of the most exciting aspects of energy trading is there is no “typical day.” In trading physical oil and refined products, traders and commercial operators work in tandem to define how to make decisions about trades, and to perform with time, space, and physical molecules as the constraints. An energy trader relies on a combination of fundamentals (supply and demand, flows, storage, regulatory environment, weather, to name a few), availability of information, relationships, and technical analysis to define the parameters of what trades to put on, and what exposures to take.
An energy trader and operator analyzes a lot of moving pieces. Traders can make or lose money on the physical movements of the oil, and the paper positions that are used as hedging instruments, or positions left unhedged. Traders and operators are constantly making decisions with incomplete information, with the best traders nimble in both volatile and stagnant markets.
At Shell Trading, and as an operator, my daily life includes analyzing physical options around the blending and movement of fuel oil, and making decisions to optimize time, method of transport, and economics around the fuel. For example, a trade with a volume optionality of 10% will allow me to look at market structure, and decide whether to deliver more or less oil to a counterparty based on contango or backwardation, and pricing curves. I also analyze the economics of each barrel when I am blending, by evaluating cost and structure to blend fuel oil components into the most profitable barrel. In other words, blend the cheapest and most available barrel to sell for the highest margin. On the day-to-day, I talk to my terminal, freight team, barge company, oil tanker operators, oil inspectors, counterparties, and Shell colleagues who handle other aspects of the deals.
Energy traders and operators are considered “Front Office,” and they work with a broad network of groups within an organization. Throughout the life cycle of a deal, traders and operators may interface with contracts, logistics, trading assistants, analysts, operators, inventory reconciliation support, risk analysts, tax analysts, compliance, oil settlements, demurrage, post-deal, and business development associates, to name a few.
What qualifications does one need to become an energy trader? Can someone with an engineering degree succeed as an energy trader?
There are no set qualifications to be an energy trader, however, analytical and quantitative abilities are important, along with an ability to process large amounts of incomplete information, appetite for risk, ability to make decisions in a very fast-paced environment, and ability to develop and cultivate relationships. At Shell, many of our successful traders have engineering backgrounds—from chemical to mechanical to petroleum. Engineers who understand the chemistry of each molecule, interaction between components, refinery systems and flows, and economics have an advantage. This knowledge allows them to take good calculated risk. These traders better understand the economics of unconventional streams and flows, and can often better visualize how to blend unattractive streams into more valuable and saleable barrels.
What role does geopolitical risk play in your decision to sell to or buy from international markets?
Geopolitical risk certainly has influence in the oil markets, even though market moves do not always sync with fundamentals. For example, two crude tankers were recently attacked in the Middle East, which caused crude to spike. While some players bet on this type of conflict or instability, as it could affect the supply of oil, other traders rely on the fact that news typically means an event is already priced into the market. Also, while the flat price of oil may be affected, and have a volatile jump or loss, it does not necessarily mean a trader will make money or lose money as a result of the event. This is because profit and loss is measured on the mark-to-market value of a trader’s exposures. With geopolitical and regulatory risk, traders will take advantage of arbitrage, moving barrels or positions from one market to another with a higher landed value in order to take advantage of geographical price differentials. Most energy traders, in this regard, are arbitrage traders, or basis traders.
How has your experience been working in energy trading, given it is still an unconventional career choice for women?
Energy trading can be a difficult field to enter as a female. Historically, the industry has favored male traders, but similar to many male-dominated fields, the statistics have slowly started to become less skewed. Many areas within trading function in a meritocracy, where gender is not a factor—roles from analyst, to risk, to trader, benefit from the performance of the analyst, and are gender-independent. In almost 6 years at Shell, I am pleased to see more women move into leadership roles, some very senior. As more women enter, remain in the workforce, and set an example for the younger generation, this global balance should continue to improve.
What does the future hold for you?
A trading analyst has several opportunities to advance to various parts of the organization, as they get an in-depth understanding of how business is run. After gaining experience in commercial fuel oil blending and operations, my goal is to trade physical oil. Energy markets are as unpredictable as the future, so you may want to ask me again in another year!
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26 May 2020