Gulf War and supercycle are career highlights, says Saperia

Since Nigel Saperia first began working as an oil trader at Shell in 1976, the business of trading oil has been transformed. He speaks to Mark Pengelly

Nigel Saperia

Veteran oil trader Nigel Saperia says there are two particularly exhilarating moments that stand out from his career. The first was the invasion of Kuwait by Saddam Hussein's Iraq in 1990, which sparked the first Gulf War. From a level of just $17.50 per barrel (/bbl) at the beginning of June that year, the price of front-month West Texas Intermediate crude oil traded on the New York Mercantile Exchange (Nymex) had rocketed to $40.42/bbl by October 11, 1990, according to the US Energy Information Administration.

"That was a truly traumatic event. Clearly, in my career, the most stressful I'd ever experienced. We saw the oil market move in a way I'd never seen before, with extraordinary volatility and sensitivity to news headlines," remembers Saperia.

The other big moment was the massive run-up in crude prices that peaked in 2008, with front-month WTI hitting an intra-day high of $147.50/bbl on July 11. Saperia left the industry about a year before WTI hit its peak, but says the time leading up to it was exciting nonetheless. "With hindsight, it would it have been nice to have had one year more... That was a very nice period, because it was very clear what was going to happen and there was a lot of money to be made."

Nowadays, Saperia spends his time scaling peaks of another kind, indulging his hobbies of climbing and skiing. But back in the late 1970s, he was a bright-eyed economics graduate with ambitions to enter the fast-developing world of energy trading. The trigger for such ambitions was a mini-thesis written while he was studying at Oxford University. "I was studying economics [and] I did a paper on what the likely effect of the discovery of North Sea oil would be on the UK economy. That was the start of the slippery slope."

After taking a job as a junior trader at oil major Shell in London, Saperia moved to Singapore, where he traded oil and products for one of the company's local refineries. But these were early days for the oil market, he notes, and the nature of oil trading was very different to today. "It was much more relaxed... It was a trading world in which the first oil futures contracts were just starting off and were really something hardly anybody paid attention to," he notes.

We saw the oil market move in a way I’d never seen before, with extraordinary volatility and sensitivity to news headlines

All that changed radically during his career. By the late 1980s, many more traders were paying attention to Nymex's benchmark oil contracts, while oil swaps were becoming increasingly common in the over-the-counter market. In 1988, North Sea oil – the subject of Saperia's mini-thesis at Oxford – began to be traded in the form of Brent futures at the London-based International Petroleum Exchange.

From 1987, Saperia found himself at the centre of this swelling activity, working as a refined products trader for US-based commodity trader Phibro, which was then part of the same group as New York-based investment bank Salomon Brothers. Given the changes taking place in the market, that linkage gave the trader a sharper edge than some of its rivals, he thinks. "The connection with Salomon Brothers made us somewhat more financial than some of the other companies at the time. I'd say it gave us a slight advantage in the way we looked at things."

Another of the company's great assets was Andy Hall, the legendary oil trader who continues to lead Phibro – now a unit of California-based Occidental Petroleum. "He was extraordinarily competent and ambitious. He didn't suffer fools gladly and expected a lot. The high standards he set really pushed Phibro into the top tier of the oil trading world."

Enthused by the changes afoot in the business, Saperia switched jobs in 1991, moving to Bankers Trust – the US investment bank known as a pioneer in derivatives. There, Saperia managed a group handling the bank's derivatives trading activity in oil. While he says he learnt a lot from the experience, it ended disappointingly, with high-profile scandals and losses leading to the bank's takeover by Deutsche Bank in 1999. "Bankers Trust was falling apart at the time and the takeover was a rescue in many senses. I just decided that I didn't really want to do the same job working for Deutsche Bank and that I could do better," he says.

Saperia then took another job working for Swiss commodity trader Glencore. As well as working as a senior oil trader there for eight years, he also helped to develop the company's nascent risk management function. Using his banking experience, Saperia says he was able to bring the company up to speed on best practices in areas such as mark-to-market valuation and the use of value-at-risk. "I spent quite a bit of time bringing them up the curve on that, because it was something I'd known very well from my Bankers Trust days."

Throughout his time in energy trading, Saperia says one thing that has always impressed him is the sheer professionalism of many of the firms involved. While blow-ups and losses have received plenty of airtime over the years, there were many unacknowledged successes too, he argues. "There were a great many successes along the way and they don't get the same headlines," he asserts. "There was an immense degree of professionalism, and as far as I can see, there continues to be."