While reading HSBCs Global Market's business May-11 strategy day transcript(http://www.hsbc.com/1/content/assets/investor_relations/strategy_day/2011/110511_strategy_day_cust_group_transcripts.pdf), I noticed that they had collaborated with Total(French oil and gas company) for a product where Total manages market risk and physical delivery and HSBC manage the sales and offering and the credit risk. That is, each party remains in its core competency zone. Given the recent blockbuster IPO of Glencore, one of the few independent commodity processors, I thought this trend needs some elaboration on.
Unlike most traders, Glencore has a substantial physical presence in procurement, processing, storage and shipping. That is why besides financial arbitrage apart, it can exploit physical inefficiencies(like say crude oil trading at less than the refined price-GRMs). Also, by being in the spot market, its on the ground intelligence would be more than even the most intelligent financial markets trader.
When I spoke to a few commodity traders/structurers/risk managers, my suspicion was confirmed when they said that the oil majors/commodity majors were not their preferred customers, margin wise, as they were likely to be informed traders, resulting in a negative NPV transaction for the counterparty. Still, because these majors rarely speculate, they do not pose problems/competition for banks. Still, banks do recognize this talent pool, and snap up leavers from those companies.
Moral:- If you want to be the best commodities trader/structurer/risk manager out there, you are probably better off starting your career with a company in that sector(preferably one like Glencore), than an investment bank.