London

oil trader
A day in the life of a
Text and photography
by Bram Druckman

A s Katy Lunn bicycles from her home in Wimbledon to the

ConocoPhillips trading offices at Portman House in London’s
West End, she already is making trades in her head.
A trader on the heavy-oil desk in Europe, Africa and Middle East
Commercial (EAME Commercial), Lunn’s primary responsibility is
purchasing and selling refined products for the Humber, Whitegate
and Wilhelmshaven refineries. But, to complement this, she
always is looking for opportunities to buy and sell related energy
commodities that will add value to the company while generating
a profit for the Commercial business unit.

28 ConocoPhillips

WHAT IS TRADING?
I n simple terms, trading for ConocoPhillips
is buying and selling energy commodities on
regulated markets. All refineries need crude oil
and feedstocks to turn into finished refined prod-
ucts. Traders work with refinery planning teams
to ensure that the right commodities are bought
and sold when needed, which enables them to
optimize the refinery’s profitability.
There are different kinds of trading contracts:
long- and short-term physical transactions, or de-
rivatives, such as futures, swaps and options. Once
a trader has taken a position and locked in prices
under these contracts, production quotas change,
a refinery may have to shut down for some rea-
son, a planned turnaround may take longer than
scheduled, and external events can impact the
availability of crude and products, which also can
affect prices. A trader’s job is to take all of these
factors into consideration, along with many
others, and manage the contracts profitably.
A profitable trade occurs when a contract is
purchased and the price of that commodity later
goes up. Instead of taking delivery, a trader then
may sell that contract to another buyer, and that
LONDON OIL TRADER
shows up as profit on the books. They also can
simply have it delivered to the refinery so the
company has purchased that feedstock at a lower
price than the market average, again making a
profit. On the other hand, if a company has a
contract for more feedstock than it can accommo-
date and it’s getting close to the delivery date, it
may have to sell the cargo for less than what they
paid to get it off their hands quickly. This is called
a distressed cargo and shows up on the books as a
loss. These are just two scenarios among count-
less others with a lot of contracts traded back and
forth for a variety of reasons, each company hav-
ing their own needs and requirements.
FUTURES TRADING
Above left: Fuel
I n addition to a pure sales and supply role using
physical transactions, traders create value by
buying and selling futures and options contracts.
Oil and Feedstock
Trader Katy Lunn
Below: A panoramic
With options contracts, they don’t actually buy
view of the EAME
the commodity, they take out an option to buy it trading floor at
at a certain date, but are not obligated to buy it if Portman House,
they later decide it is not required or unprofitable. London, where Lunn
and fellow traders
They pay a premium to have this option. buy and sell energy
When dealing in futures, the goal of every commodities
spirit Magazine 29
 Common
London Oil Trader
A219 Wimbledon
Park
Wimbledon
trader is to buy the commodity for less and sell
it for more. An example would be buying 10,000
barrels of crude oil at $110 per barrel with the aim
of selling it to another company at a later date. If
the price goes up to $115, that’s $5 of profit per
barrel. But what happens when the price goes
down? Traders manage the risk by deciding on
the level at which they will stop a trade. If the
price falls to, say, $105, the contract is sold to
avoid further losses. The Commercial groups,
including EAME Commercial, all rely on value
at risk (VaR) measurement, a risk management
accounting and control mechanism to limit their
exposure in changing market conditions. This
prevents major losses when markets go sour.
Above: Traders “It’s a fast moving, complex job requiring an
access a variety
of sources for infor-
overview of the big picture, an understanding of
mation throughout the physical system underlying the trades, and
the course of a the ability to formulate a trading strategy and
typical day.
make trading decisions based on that, some of
Below right: which, unfortunately, don’t turn out the way you
Fuel Oil and planned,” Lunn said. Truth is, sometimes traders
Feedstocks Trader win, sometimes they lose. But the goal is to aver-
Hugh Leonard
age out the gains and losses over time so the profit
and loss columns come out on the plus side.
To prepare for this wheeling and dealing, Lunn
began with a degree in economics from the U.K.’s
Durham University, followed by one and a half
years in U.K. marketing, then three years as a trad-
ing analyst producing daily P&L reports, and she
recently celebrated her eighth year with Conoco-
Phillips. So numbers are no stranger to her.
INFORMATION IS KEY
T he moment Lunn sits down at her desk, her
first concern is getting up-to-speed on the
day’s markets. In addition to oil-related news from
Reuters and other agencies appearing on monitors
throughout the trading room, three computer
screens on her desk display an array of graphs
and figures showing price movements for crude
30 ConocoPhillips
A205
A3
A3209
Wandsworth
A217
A217 Earlsfield
oil and products on a daily, weekly and monthly
Clapham
timeline, including reports of WTI futures
trading activity on the New York Mercantile
Exchange (NYMEX) and Brent futures on the
IntercontinentalExchange (ICE).
Adding to this, Lunn soon is in touch by
Yahoo!® Messenger or on the phone to a wide
range of people in the marketplace, from in-house
specialists to refinery people to brokers to traders,
people with whom she has established important
relationships over the years, to find out what is
happening around the world. Oil traders con-
stantly talk to one another, and everything from
hurricanes in the Gulf of Mexico to unrest in the
Middle East to war or natural disasters can affect
the price of crude and products.
Based on what she hears and market assess-
ments from industry price reporting agencies of
trading deals worldwide, Lunn and her associates
formulate a view of where the market is headed –
up or down. Armed with that information, along
with weekly analysts’ meetings, ConocoPhillips
traders determine how much they should pay or
receive for each deal. Price benchmarks, which
represent average market prices, are set for the
traders, and their performance is judged against
these. “‘Beating the benchmark’ for traders means
 Bayswater
Paddington
A3217 Fulham
London Oil Trader
A308
A40
West
W
We
estt A4
Brompton North
Kensington A5
Portman
A3220 Hyde House
Belgravia Park
Marylebone
Chelsea

A3216

A3207 A3212 A3
A302
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2 Mayfair
Ma
Mayfair
Battersea
paying less than the average for a purchase deal or Above: Lunn’s daily
m cycling route from
selling for more than the average on a sale. That’s A3214 her home in Wimble-
a day when traders go home smiling,” Lunn said. don to Portman
House in London’s
MAKING TRADES West End is nearly
10 miles one way.

A typical day for Lunn may involve negotiating

with a counterparty on a physical deal already
in progress; bidding on futures contracts or selling
them, if such is the plan; or fulfilling a specific
refinery requirement, such as procuring a cargo
of feedstock by a certain date for one of the
company’s refineries. “Having a good overview of
where things stand as far as the market is con-
cerned is the first place to start,” she said. “And
the better you can analyze your needs based on
the market, the better trader you are.”
But finding the right cargo is not always that
simple since the heavy oil she trades in, dirty,
bottom-of-the-barrel refined products, all come
with different amounts of sulfur, depending on
where they were sourced from. A counterparty
may have a cargo of high-sulfur product to sell that
isn’t exactly what the refinery wants. Yet, since the
refinery wants to remain on-schedule and make as
much high-end product as it can, she calls them to
see if they can live with that, perhaps blending it
with low-sulfur product to meet their specs.
A lot of messaging goes back and forth among
Lunn, the refinery, brokers, counterparties and
chartering to see if the deal can be done. Some-
times yes, sometimes no. If no, Lunn goes shop-
ping again, getting in touch with other traders and
brokers to see what else is out there, until she finds
the right mix. It’s a balancing act with numerous
pitfalls, and even when she finds a supply of the
right product, a lot still can go wrong: there may
be no ship available, or the ship they were count-
ing on may be rejected by the vetting department;
the product may be off-spec, or something may
happen with operations at the refinery resulting in
them being unable to take delivery; bad weather
Left: Lunn confers
with Suzane
Broderick, the
Whitegate refinery’s
production planning
lead, who visits the
London office twice
per month to talk
strategy and get
feedback from the
traders.
could delay the ship; on and on.
“It’s an imperfect world,” said Products Trad-
ing and Operations Manager Jo Lee. “Traders like
Katy, her many colleagues in the London office
and in similar offices around the world, take that
into account every day. In the end, after encounter-
ing false starts and dead ends, they inevitably find
and deliver a cargo of acceptable product. Their
dedication to such a vital task is one of the ways
our company remains successful.”
Heading home on her bike at the end of the
day, Lunn sometimes may feel like she’s been
swimming upstream all day, especially in today’s
volatile oil markets where even the best-made
plans go astray. One of the requirements in her job
description is to be comfortable with failure and
be able to turn difficult situations around. Still, she
and other ConocoPhillips traders should feel good
that they play an important and essential part in
keeping our homes heated and cars running. And
tomorrow is another day. ■

spirit Magazine 31