Trade in Crude Oil and Product
Jan 4, 2011 Business
Trade in crude oil and products has always been a lucrative business, because it is a sellers market. This means that the market is dominated and run by the lobby of the seller, rather than buyers. Thus, the sale of the product is not always the most difficult when it comes to trade crude oil. At the same time the attainment of the distribution of products remains the most difficult with high barriers to entry.
Most sales of oil on the open market is the OPEC (Organization of Petroleum Producing and Exporting Countries). Specifically, the Nigeria National Petroleum Corporation, known as NNPC sells most of its shares on the open market. Now the big question is how to apportion the NNPC? You need the following to the opportunity to obtain an assignment of this state agency:
1. Fund: Provides funding of over $ 100 million test and present of these funds (POF) of the NNPC.
2. Performance Bond: In addition to funds which should also provide a performance guarantee of at least 1% (1 million) of the amount above.
3. Besides the two above, is expected to be local or international oil refinery. If you’re one of these then you should have at least recognized operator in the oil sector.
If not eligible for the above criteria, there is another way to extract oil. Now you can choose to buy from people who receive the benefit of the NNPC, but you pay a premium on the price of the NNPC.
Once you’ve identified the source of oil extraction can be moved over to take charge of the cargo. The two most common ways to buy crude oil via TTO (Tanker Take Over) or base TT (For Tanker Tanker). Sometimes it is also the CIF (carriage, insurance and freight) and FOB (free on board), but TTT and TTO are still the two most admitted to trading of crude oil.
After taking possession of the cargo to be presented in two options. You can choose to store the cargo in a storage terminal and then sell it as a bulk cargo break if a price increase is expected. To reduce the risks to a minimum, you can also choose to sell the whole load at once, but their profit margins in this case is reduced. Once can also choose a combination of both to balance the levels of risk and benefit.
I hope the above gives a brief overview of the trading activity of crude oil.
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