ADVERTISEMENT

Seven-Figure Bonuses Rise This Season for Top Energy Traders

Seven-Figure Bonuses Rise This Season for Top Energy Traders

(Bloomberg) -- More gas and power traders than ever will take home seven-figure bonuses after profiting from a deep slump in European energy prices.

The natural gas lost almost half its value last year because of a worldwide glut, a deeper slump than during the last financial crisis. The bearish trend helped many of the best traders to rake in $1 million or more in bonuses for 2019, recruiters said.

This year could be very different as the struggle to contain the coronavirus will impact everything from trading to hiring plans.

“Many people had their best years ever,” said George Johnson, co-founder of Johnson Elborne, a commodities search firm. “Bonuses will reflect that.”

From oil majors to utilities, successful natural gas traders were a major profit contributor in 2019. The bearish tilt to the market included several long stretches of declines on the region’s benchmark in Amsterdam, which finished the year down 45%. Liquefied natural gas in Asia slumped 41% in 2019, a rout that continued and produced a record low last month.

Trading companies or the market units of large energy companies typically don’t disclose how much they earn (or lose) per commodity in their financial accounts.

But Royal Dutch Shell Plc has said it enjoyed “one of the strongest years” trading gas. Annual profit at the trading arm of the German utility RWE AG almost quadrupled to 702 million euros ($788 million). It surged 16% at an Electricite de France SA unit after a “strong performance thanks to favorable positions” in gas and power.

Seven-Figure Bonuses Rise This Season for Top Energy Traders

“A year such as this may only come around once or twice in a trader’s career,” said Jonathan Funnell, head of gas and power at Proco Commodities Ltd. in London. “With such a clearly defined trend, traders had ample opportunities to capitalize.”

The cream of the crop will even take home eight figures, and the overall increase could be more than 20% above 2018 levels, the recruiters said.

Swedish utility Vattenfall AB turned around the fortunes of its energy trading arm in the fourth quarter as markets nose-dived. U.S. hedge fund Citadel LLC also profited from a strong performance in European power and gas trading.

In the U.S., gas traders benefited from price volatility. “We are seeing capital inflows into gas after outflows for the past five years,” said Sid Perkins, founder and managing partner at the brokerage firm Ion Energy Group LLC.

Bonuses in the LNG industry also increased even though prices slid. Many traders are finally able to make money from the supply deals and portfolios that took years to build up, said Alex Lee, managing director at Connexus Global, a recruiter in Singapore. Trading houses from Gunvor Group Ltd. to Trafigura Group all reported soaring LNG volumes as they continued to diversify away from oil.

And more new entrants in LNG increased competition for experienced traders, with companies paying higher bonuses to hold on to their best staff, said Mark Taylor, a branch manager at Imperium Commodity Search in Stevenage, England.

But as many traders will celebrate bonuses typically paid out this month and next, recruiters are realistic about what the future holds. With the coronavirus curbing global growth and whipsawing markets, there is a risk that those payouts could be hurt by the downturn so far in 2020, said Johnson.

Obstacles are piling up for LNG traders after years of being the darlings in the energy market. The fastest growing fossil-fuel market has become increasingly global in the past few years but is headed for retrenchment this year.

“2020 will likely be one of the most challenging years so far for traders,” said Tom Hughes, head of the LNG search practice at Proco. The mild winter, a global glut, slow demand growth, the coronavirus and the oil-price crash are all creating a “perfect storm,” he said.

Sarah Behbehani, senior vice president of LNG at Jera Global Markets, agreed. She said last month in an interview with Bloomberg Television that this year ``will be one of the worst years, if not the worst, in the LNG market in terms of prices and demand growth.”

The virus is forcing nations to close down travel and industry. Many traders will be reluctant to change jobs given the weak outlook strong paycheck for 2019.

Hiring “will slow, and people are costly,” said Peter Henry, managing director at H.W. Anderson Ltd. in New York. But since many firms expanding as part of a long-term planning, it’s more a matter of timing, he said.

There’s more jobs in LNG, where trading houses and utilities have focused much of their growth efforts in the past few years. The biggest buyers are all in Asia and energy companies are building out activities in Singapore. Hence there’s a lot of competition for people with proven skills and experience.

“Firms are looking to relocate staff to Singapore because there’s a lack of LNG traders in the region at present,” said Taylor at Imperium. “People who move there can expect to earn a higher base than elsewhere. A lot of money is going there.”

©2020 Bloomberg L.P.