Key Responsibilities and Required Skills for Commodity Trader

🎯 Role Definition

The Commodity Trader is responsible for executing and managing physical and/or financial commodity trades to generate profit while controlling market, credit and operational risk. This role combines market analysis, pricing, risk management, and commercial negotiation to optimize P&L across a portfolio of commodities (e.g., crude oil, refined products, natural gas, power, metals, agricultural products or emissions). The Commodity Trader partners with origination, logistics, operations, finance and compliance to structure deals, hedge exposures and ensure timely settlement and delivery.

Key focus areas: trade execution, portfolio management, hedging strategy (futures/options/swaps), counterparty negotiation, credit and margin management, inventory oversight, and regulatory compliance.

Primary keywords: Commodity Trader, commodity trading, physical trading, derivatives, hedging, market analysis, P&L management, trade execution, risk management.

📈 Career Progression

Typical Career Path

Entry Point From:

Junior Trader / Trading Analyst supporting execution and P&L reporting.
Commercial Analyst or Origination Analyst in commodity sales or trading desks.
Risk Analyst or Operations Analyst with exposure to trade capture and settlement.

Advancement To:

Senior Trader / Head of Desk overseeing multi-commodity portfolios and junior traders.
Portfolio Manager for commodities or commodities-linked funds.
Trading Desk Manager or Global Head of Commodities with P&L and strategy responsibility.

Lateral Moves:

Origination or Sales roles (structuring and customer relationship focus).
Risk Management (credit, market, or operational risk specialization).
Physical Supply Chain / Logistics leadership for commodity supply operations.

Core Responsibilities

Primary Functions

Execute proprietary and client-driven trades across spot, forward, and derivative markets (futures, options, swaps) to meet target P&L while adhering to firm risk limits and compliance policies.
Develop and implement hedging strategies that mitigate market, basis and seasonality risk for physical positions and inventory across commodity portfolios.
Monitor real-time market movements, news flow, weather, freight and macroeconomic indicators to identify trading opportunities and adjust positions accordingly.
Build and maintain mark-to-market valuations, daily P&L attribution, and scenario analyses to explain drivers of profit and loss to senior management and stakeholders.
Structure bilateral and exchange-traded deals, negotiating price, delivery terms, credit terms, collateral/margin arrangements and commercial clauses with counterparties.
Manage counterparty credit exposure by applying credit limits, monitoring utilization, coordinating with credit teams and initiating margin or collateral actions when necessary.
Coordinate with operations, logistics and supply chain teams to ensure timely physical delivery, cargo nominations, demurrage management and reconciliation of shipments.
Capture trades accurately into front-to-back systems, validate confirmations, and resolve trade lifecycle exceptions (matching, settlement and invoicing).
Use quantitative models and analytical tools to price options, spreads, and complex structured products and to inform execution strategy.
Maintain position limits, factor in concentration risk, and proactively reduce concentrations through hedging or unwinding when limits are approached.
Prepare, present and defend daily/weekly market and P&L reports to trading desk leadership, finance, risk and senior stakeholders.
Design and implement execution tactics across multiple venues and platforms (exchanges, brokers, ECNs, OTC) to minimize slippage and execution costs.
Lead periodic stress testing and what-if scenario analysis to evaluate portfolio resilience to price shocks, liquidity squeezes and margin volatility.
Liaise with Legal and Compliance to ensure documentation (ISDA, master agreements, confirmations) is complete and compliant with regulatory and KYC/AML requirements.
Calibrate and maintain trading models, pricing tools and automated alerts; collaborate with quant and data teams to improve analytics, signals and trade automation.
Actively manage margin calls and collateral movements, optimizing funding and working capital usage while adhering to treasury and credit constraints.
Deliver ad hoc market intelligence, pricing benchmarks and competitor behavior analysis to support origination, sales and senior management decision-making.
Drive yield enhancement and carry strategies for storage and inventory, assessing basis trades, time spreads and calendar arbitrage opportunities.
Lead post-trade analysis and trade review sessions to identify execution improvements, operational gaps, and compliance exceptions; implement corrective actions.
Support new product and market entry initiatives by conducting feasibility studies, regulatory reviews and go-to-market execution plans.
Ensure rigorous documentation of trade rationale, risk mitigants, and approvals for audit readiness and regulatory reporting.
Mentor junior traders and analysts by providing coaching on market dynamics, trade mechanics, risk controls and system workflows.
Collaborate on pricing strategies with supply, refining, or sourcing teams to optimize commercial margins across the value chain.
Monitor and manage FX exposure where commodity settlements are denominated in multiple currencies and execute hedges to protect margins.

Secondary Functions

Support ad-hoc data requests and exploratory data analysis.
Contribute to the organization's data strategy and roadmap.
Collaborate with business units to translate data needs into engineering requirements.
Participate in sprint planning and agile ceremonies within the data engineering team.
Maintain trade books, desk policies and standard operating procedures; update desk manuals as processes evolve.
Provide subject matter expertise for new system implementations (e.g., ETRM, trade capture, OMS, risk platforms) and participate in UAT and training.
Engage with external brokers, brokers’ research teams and market forums to maintain market visibility and benchmark pricing.
Represent the trading desk in internal committees related to capital allocation, limit setting, and product approvals.

Required Skills & Competencies

Hard Skills (Technical)

Deep knowledge of commodity markets (crude oil, refined products, natural gas, power, metals, ags, or emissions) including spot, forward and derivatives markets.
Proficiency in derivatives pricing and modeling (futures, options, swaps), including Black models, volatility surfaces, and Greeks.
Strong quantitative skills: Excel (advanced formulas, VBA), Python or R for analysis, and SQL for data interrogation.
Experience with trading and risk platforms: Trayport, ICE/NYMEX/ICE Clear, CME, ETRM systems (Openlink, Endur, Aspect), Bloomberg, Refinitiv Eikon.
P&L attribution, mark-to-market and settlement processes expertise; familiarity with trade lifecycle (capture to settle).
Credit and margin management capabilities, including experience managing bilateral collateral and clearing margin requirements.
Solid understanding of logistics, shipping, storage, inventory valuation and contractual delivery processes.
Familiarity with regulatory frameworks affecting commodity trading (Dodd-Frank, EMIR, REMIT, MiFID II) and compliance obligations.
Strong commercial structuring experience for spot, term and structured contracts including fixed-for-floating, basis and tolling arrangements.
Experience building and validating stress tests, scenario analyses and VaR or other market risk metrics.

Soft Skills

Strong commercial judgment and decision-making under pressure with the ability to take responsibility for P&L outcomes.
Excellent negotiation and relationship management skills for dealing with counterparties, brokers, customers and internal stakeholders.
Clear and persuasive communicator: able to present market views, trade rationale and risk positions succinctly to senior management.
High attention to detail and operational discipline to prevent settlement, confirmation and accounting errors.
Collaborative team player who can work across trading, operations, finance, legal and compliance to deliver outcomes.
Adaptability and resilience in a fast-moving market environment; ability to work extended hours around market events.
Intellectual curiosity and continuous learning mindset — keeps up with market structure changes, new instruments and technology improvements.
Coaching and mentoring ability to develop junior staff and contribute to a high-performance desk culture.

Education & Experience

Educational Background

Minimum Education:

Bachelor's degree in Finance, Economics, Mathematics, Engineering, or a related quantitative discipline.

Preferred Education:

Master's degree (MSc, MS, MFin) in Quantitative Finance, Financial Engineering, Economics, or an MBA for senior commercial roles.
Professional certifications beneficial: CFA, FRM, or industry-specific training in commodity markets or risk management.

Relevant Fields of Study:

Finance / Financial Engineering
Economics / Applied Economics
Mathematics / Statistics
Engineering (Industrial, Chemical, Mechanical for physical commodities)
Data Science / Computer Science (for quant or systematic trading roles)

Experience Requirements

Typical Experience Range: 3–10+ years, depending on role level (Junior Trader: 0–3 years; Commodity Trader: 3–7 years; Senior Trader: 7+ years).

Preferred:

Proven track record of profitable trading or commercial origination in the targeted commodity class.
Experience in both physical commodities and derivatives markets, with demonstrated ability to manage P&L, credit and operational risk.
Prior exposure to multi-asset or multi-commodity desks for broader portfolio management roles.
Experience negotiating new or complex contractual arrangements and working with logistics and operations to execute physical deliveries.
Demonstrated familiarity working within regulated environments and with compliance frameworks relevant to commodity markets.