Commodities and Global Markets Podcast Series

Episode 10 Transcript

Macquarie Podcast Series featuring Commodities and Global Markets

Speakers: David Hochberg with Kaye McKee

Recorded on 12 January 2021.





Voiceover: Welcome to the Macquarie podcast series.



Kaye: Hello, everyone. My name is Kaye McKee and I’m a Senior Trader in the Commodity Markets and Finance, or CMF, team in Houston. I’m delighted to welcome you to the 10th episode in our Macquarie Podcast Series, featuring Commodities and Global Markets, or CGM. Today, I’m pleased to be joined by David Hochberg, the Global Head of Macquarie Commodities Trading, which is our physical oil trading business.

David, thanks for joining me today. Before we talk about our oil trading business, can you tell us a little about your career and how you got to where you are?



David: I started in a trader development program in a trading company in Houston in 2000. A couple of years later, I moved to Los Angeles to work for Cook Inlet Energy Supply, a natural gas trading business which Macquarie purchased in 2005. At the time, I didn’t know it but joining Cook was a pivotal opportunity, as the business has proven to be entrepreneurial and I have enjoyed the support of our leadership and have had the opportunity to work in a number of roles. They’ve included scheduling, physical and financial trading, portfolio management, leading a North American business to now leading a global business in Macquarie Commodities Trading. And all the while I’ve got to work with some great people.

What about you, Kaye, how did you arrive here?



Kaye: Well, similar to you, I started out as a trader trainee. I was working for Cargill on the crude desk and shortly after I joined, we had some turnover in that team and I was able to help manage some positions through the turnover and then move into a trading role. Cargill’s business was bought by Macquarie and I managed the transition there on crude trading and have been with Macquarie for about four years now. I think one thing from your comments that stuck out to me about being in an entrepreneurial environment really hit home, because I think that’s what Macquarie does really well. Employees here are empowered to create value and I think in my much shorter career, that’s been a key point.

This is a question we always ask on these podcasts to help those starting out in their careers: what's the best advice you've been given, David?



David: I’ll give a piece of advice as well as share the best advice that I've been given. First, keep an open mind and look at all opportunities without bias. If I had asked my 21-year-old self to describe what I’d be doing and where I’d be living, I would have failed that test miserably. Looking back, a career fair I went to at my school in 1999 proved critical. I was fortunate to have a conversation with a recruiter from an unknown company, at least unknown to me, during that career fair and that helped me learn about a career option that I had previously known nothing about. I took a leap of faith and here we are 20 years later. The best advice I can give is to find a career that you’re passionate about and are motivated to do, that's the key. The best advice I’ve been given is to be curious and to ask questions. I've been fortunate throughout my career and especially at Macquarie to work with colleagues that love to share their experiences, and teach and have an opportunity to collectively learn together. We get better each and every day, and that's proven critical to our success. What about you, Kaye, do you have some good advice to share with our listeners?



Kaye: So, before I answer, I just want to circle back on something you said. Let’s rewind to 21-year-old David Hochberg. What would you have said your future career was going to look like at that time?



David: My 21-year-old self was very much aligned with wanting to go into investment banking or going into management consulting. It was kind of what I guess a lot of my peers were doing at the time and it seemed like it would provide, I guess, a fairly known and potentially lucrative path as I move forward. As I noted, I had a recruiter, the company was actually called Dynegy, that tapped me on the shoulder while I was talking to a recruiter from Arthur Anderson and asked me if I'd have a brief conversation with them. I went and talked to them and I guess the rest is history. I found out that there was this thing called energy trading that they definitely didn’t teach us in undergrad. And it sounded interesting. And so, like I said, I took a leap of faith and moved to Houston and here we are.



Kaye: Yeah, that’s a great story. And I think very relevant because that decision matrix may not have changed for a lot of the interns that we’re interviewing at the moment and people who are looking to get into trading and still very much a conversation dominated by investment banking or consulting at times. And my personal view is that people who don’t consider trading really just don't know what they're missing out on. So, circling back to the best and worst advice. When I was looking for a job, I had lunch with a family friend who worked in finance, and I knew that I wanted to work in finance, and he told me to seek out volatility. And what he meant was find a sector that’s undergoing a change or a company that's entering a new market, or even a team that has new leadership. And some people see uncertainty as threatening in those situations, but I always try to reframe it as a new problem-solving opportunity. And I think that is when I’ve really had rewarding career experiences as well. In particular, the oil market is one of the more volatile markets and it's a market that is undergoing constant change and hence providing constant opportunity.

So, I’d like to turn now to our physical oil trading business. Can you take us through what the team does?



David: Kaye, I think it’s important to put in context when I explain what our team does to also maybe highlight a bit of the competitive landscape. Our team is in the markets competing daily with oil majors, trade houses, other proprietary trading firms, folks with potentially very big physical trading arms. Our business is, you know, we don’t own pipelines, although I guess we could one day, we don't have a big physical infrastructure at this point in time. So, our team, dating back to its origins, has competed on analytics. We are a business that has many great people with data and analytics at our core. First, we utilise our analytical platform and collective experience to determine where to best invest in the oil markets, taking risk across both crude oil and products around the globe. In addition to proprietary trading, we focus on identifying physical trading opportunities, such as oil storage and pipelines, where we can leverage our analytical footprint and team to deliver positive outcomes. We also work with Macquarie’s customers to deliver optimal physical solutions to their needs. And, of course, we are consistently and constantly evaluating our portfolio to look for ways to grow our platform.



Kaye: Yeah, that’s interesting to hear how our analytics origins have really expanded into helping create value for customers and into a broader business. Can you give us an idea of the scale of that business and how we compare with some of those other companies that you mentioned, like the majors or the trade houses? For example, how many barrels of oil a day do we trade or where is it located?



David: Well Kaye, MCT sits within Macquarie’s CGM platform, a major player across the commodity spectrum globally. We see significant opportunities to leverage our core capabilities to continue growing MCT and something that both our team and our investors remain proud of. To give you an example of our scale, our total traded volumes were north of 4.5 billion barrels last year. Of course, a significant amount of that was financial.

Kaye, I think many of us take for granted the ease at which one can find a petrol station to fill their vehicle up with fuel. How do you explain what you do to your family and friends that are not familiar with physical oil trading?



Kaye: Well, I think gasoline is a great place to start in answering that question because it’s something that everyone is familiar with, and like you said, some people take for granted. So, before it actually gets to the gas station, there's a process of oil production, transportation to a refinery and then refining into various products, including gasoline, and then additional transportation to demand centers. So, Macquarie works in basically every link of that chain. And we work both financially in terms of helping to set prices and trade at each of those links, and we also work physically in terms of actually moving the gasoline from point A to B or moving the oil from the crude producing region to the refinery. So, I think what that means is you have a team of people, like I mentioned, involved in financial trading but also physical operations and, you know, moving gasoline into your gas station. And I think people listening might be surprised to hear that.

So, Dave, can you take us through the various roles in the team and how the team works?



David: I guess first I like to use a wheel analogy for our business, and that everyone is a spoke on that wheel and everyone has to perform their role in order for that wheel to turn and be successful. So, when you think about our business, we’re a global business with people located around the globe in places such as Houston, Minneapolis, Geneva, Beijing, Singapore, among many other places. We have folks with backgrounds in finance, accounting, legal, engineering, human resources, we’ve got data scientists and the list goes on. And every one of those roles, no matter how senior or how junior, everyone needs to work effectively and collaboratively together to come up with the best solutions to our business, or I guess for our business.

And when you think about COVID, we’ve had people working from home offices around the world. I think many of us were probably very curious to see how we would perform while working from home. The connectivity that we have and our in-house systems that we’ve developed, and our team's strong sense of communication and sharing have allowed us to stay a tight-knit team, one that's sharing information in real-time and is looking for the best opportunities and outcomes for Macquarie consistently on a 24-hour basis with 24-hour coverage.

So, Kaye I’m curious, you've been trading oil at MCT for more than four years now. Can you take us through the volatility in the oil markets of this past year? As I noted, you know, we’ve been working at home and you’ve had to deal with COVID and I'm pretty sure there's a nice headline about WTI, which is one of your products trading down to, I think, what was it, negative $38? You know, what's it been like?



Kaye: Yes, that’s correct and this past year has certainly been unique. The uncertainty in energy markets really stemmed from massive shocks on both supply and demand. You mentioned COVID as a driver for the demand shock, but we also had, or are still having, very active supply shocks from OPEC and from various other oil producers. So, there wasn’t really a system or a blueprint for navigating this past year. But I think the important thing with our team at Macquarie was that everyone was empowered to act quickly based on what they were seeing in the market. So, we really relied on the strength of the team to get us through this past year and I think we came out stronger. And just to make one additional point there, you mentioned earlier, leveraging our analytics and then also working with clients to help them create value. While we were managing our internal positions over the past year, we were also helping clients such as producers or refiners or renewable energy companies to manage the uncertainty and to make sure that they had what they needed to be successful as well.

So, we’ve been involved in some really interesting deals recently. Can you share some examples?



David: Well, if we look back to early 2020, I think it provides a really great example for how combining top-notch analytics and traders with imagination and determination can help identify trading opportunities. Having a team in Singapore and China proved critical for us to both identify the potential risk created by COVID and how they may impact our markets, as well as identifying opportunities that may arise from it. We’re able to utilise both existing processes and in conjunction with identifying new data sources to help determine the impact of jet fuel demand. The teams worked tirelessly to solve the riddle and ultimately delivered a positive outcome for our business. Thinking about things more globally, I’m particularly excited about opportunities we are seeing to provide solutions to our clients that Macquarie is uniquely placed, in my view, to solve due to our global and multi-commodity presence.



Kaye: So, you mentioned multi-commodity. And one thing I’m curious about is Macquarie’s position in the decarbonisation and renewables space. So, what does that mean for fossil fuels and what role can they play in helping us transition to a lower-carbon environment?



David: That’s a great question, Kaye. Well, Macquarie Asset Management recently announced a plan to manage its portfolio in line with net zero emissions by 2040, which is in line with Macquarie's broad support of a progressive energy transition to a low-carbon economy. This complements wider activity across Macquarie and developing and managing renewable energy projects, helping clients on their decarbonisation pathways and a general transition to a low-carbon economy. This aligns with our own strategy in Commodities and Global Markets of adapting and transitioning with our clients. Energy is a large part of our business activity. And while fossil fuels will continue to be part of the solution and are necessary to help us transition to a lower-carbon environment, the transition is something we’re excited about, and it presents us with many opportunities. Given the role we play supporting our clients across the energy value chain and the expertise and market positions we have built over many years, we are well-placed to work alongside our clients in helping them navigate this change. We are already seeing these opportunities emerge in new and existing business lines and our work is ongoing. So, it’s really a significant part of the future and Macquarie is at the forefront of developing a lot of new technology and making sure that production will be in place to satisfy those demands.



Kaye: So, it sounds like there’s some great opportunities in renewables and decarbonisation. And you’ve also mentioned that we're actively growing the Macquarie commodities platform. Can you give us some examples to the physical oil business from 2021 and beyond?



David: So, we’ve focused the last three years on really ensuring that our analytical platform is robust as well as prepared for the future. We’ve worked on ensuring that we have the right traders in the right seats and the right analysts in the right seats. And you know, now being part of Macquarie, a key part of our business is the client. And we’re really looking to bring in, as we move forward, originators, business developers, folks that can help us build that deal pipeline so that we can take our physical oil expertise and really deploy it to the market and our clients.



Kaye: That’s great. And you mentioned expertise, we’re both involved in the internship program here, so I’m just curious what advice would you give to potential interns or people looking to join the group as they start their careers?



David:  I guess I would share some advice that I received from my Georgetown professor, Mark Bush, during our graduation ceremony that I think is relevant, especially if you’re an intern that's about to move into a professional career. You’re likely just either graduated from undergrad or from grad schooland that’s a big milestone achievement. And that’s one that you should be proud of, but also you need to think about what’s going to be next. And what Mark shared was, set your goals. Graduating from college is a great one from each of you, whether that’s undergrad again, or your graduate school, but keep moving those goalposts forward, don't live in the past. If you live in the past, you’re always looking in the rear-view mirror.



Kaye: Yeah, that’s great advice.



David:  What about you, Kaye? Do you have some good advice to share with our listeners?



Kaye: I think that we’ve talked about some really interesting concepts here. We both enjoy working in this group and are excited about the future. So, if any of our listeners have follow-up questions or would like to get involved, to engage with Macquarie, we’re both accessible. And I think one of the great things about Macquarie is that everyone in our group are really approachable and knowledgeable. So, please reach out.

David, thank you for joining me for that discussion around Macquarie’s physical oil trading business. For those listening, thank you for joining today’s podcast. I hope it has provided some inspiration as you consider your own careers. We look forward to welcoming you to the next episode of the podcast next month.



Voiceover: Thank you for listening to the Macquarie Podcast Series. For more information, visit To find out where a career at Macquarie might take you, please visit

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