Establishing Clear Rules for Secure and Efficient Petroleum Trading
Every day, refineries and trading companies receive new offers. Unfortunately, many of these offers are based on unrealistic and fabricated procedures—starting with meaningless ICPO requests and ending with payment structures that no refinery in the world would ever apply.
As a result, the market constantly faces the same problem: procedures created by non-competent brokerage structures with no operational background. It is time to put an end to this confusion and define clear, simple, and effective rules that protect both buyers and sellers.
Below is a practical rule-based framework designed to bring discipline, clarity, and trust back into petroleum trading.
Rule 1: Never Work With Individuals Who Are Not Proper Companies
Oil trading must never be assigned to individuals who have never operated as a registered company.
Before any engagement:
- Verify that the counterparty is a legally registered company
- Confirm that the company’s articles of association explicitly include oil or energy trade
- Check registration through the Commercial Registry Gazette
- Review whether the company has conducted any export activity in the past
Whether the company exported oil, textiles, or any other product is secondary. What matters is that it has real corporate existence and traceability. A registered company leaves a footprint in state systems, which significantly reduces fraud risk.
Rule 2: Confirm Operational Capability, Not Just Intent
A serious trading company must demonstrate that it understands oil trade operations end to end.
If the transaction involves CIF delivery, the company must show that it can manage:
- Reception and port operations
- Appointment of watermen
- Customs clearance and enforcement
- Tank operations and evacuation
- Legal and commercial documentation
Additionally, the company should be able to immediately provide:
- Previous working relationships with SGS, Intertek, or Saybolt
- A recognized ship reception agency
- A customs consultant
- Legal advisors
- Evidence from a completed commercial transaction
A company that has traded before can provide this information within minutes, not days.
Rule 3: Proof of Product Comes Before Proof of Funds
Markets are full of potential buyers—many of whom may or may not have funds. Asking trader companies to prove funds before seeing the product is illogical and counterproductive.
If a company is not the end user:
- You do not know its final buyer
- You do not know which refinery or end user it represents
- You do not know its final financing structure
Therefore, proof of product must always come first.
In all trade—just like in daily life—you first see the product, then you pay. What complicates this simple logic are intermediaries hiding behind unnecessary procedures.
The product owner must provide existence documentation to the authorized trader. This proves sales rights—not ownership transfer.
Documents such as ATSC may be used to demonstrate sales authority. While documents like UDTA or DTA are not strictly necessary, they can exist without harm. More importantly, testing permission should be granted directly via coordinated communication with:
- Customs authorities
- Tank or ship operators
- Agencies
Product testing only confirms the presence of a potential buyer, not ownership.
Rule 4: Define the Payment Structure Through Banks
No serious company wants million-dollar transactions to end in disputes. Payment structures must be planned carefully and executed through banks.
For this:
- The seller must complete Due Diligence (DD)
- The buyer must complete KYC procedures
- A CIS document is sufficient to initiate this process
Proper banking channels protect both sides and ensure long-term credibility.
Rule 5: Grant Exclusive Sales Authority—But Limit It
When a company receives authorization to sell a product:
- No parallel authorization should be given to another trader
- Documents should never circulate between multiple parties
Authorization does not need to be permanent. A one-week exclusive mandate is sufficient. If the trader cannot perform within that timeframe, the authorization can be withdrawn and reassigned.
This simple rule prevents document abuse and market confusion.
Rule 6: Refineries Must Display the Product
Refineries have the financial capacity to place products into tanks or vessels. If a product is for sale, the refinery must put it on the shelf and show it.
It does not matter whether the product is:
- In a tank
- On a vessel
The refinery must take responsibility for positioning the product. Traders and buyers who want to earn money can then engage with clarity. Leaving intermediaries to struggle without product visibility only damages the market.
Conclusion: Simple Rules Create Strong Markets
Oil trading does not need complex, fabricated procedures. It requires:
- Real companies
- Real products
- Clear authority
- Bank-supported payments
- Limited and controlled documentation flow
When these rules are applied, both buyers and sellers operate comfortably. More importantly, the market regains trust, efficiency, and execution power.
