Buying and selling in crude oil and its derivative merchandise has always been a profitable business as it’s a seller’s market. This means that the market is dominated and dictated by the seller’s lobby relatively than consumers. So promoting the product will not be always the tough part in terms of trading crude oil. At the same time getting allocation of the merchandise nonetheless stays most tough part with excessive entry boundaries.
Many of the oil traded in open market is from OPEC (Group of Oil Producing & Exporting Nations). More particularly the Nigeria Nationwide Petroleum Company, generally generally known as NNPC, sells most of its stocks in the open market. Now the big query is how you can get allocation from NNPC? You want to have following in order to face an opportunity of getting allocation from this authorities agency:
Funds: You must have funds in excess of $ 100 Million and current Proof of these funds (POF) to NNPC.
Performance Bond: Apart from the above funds you also needs to furnish a efficiency bond of not less than 1% ($ 1 million) of the above quantity.
Other than the above two, you might be expected to be an area or an international oil refinery. If you’re none of those then you definately have to be at least a renowned trader in Oil enterprise.
In case you can’t qualify under the above standards’s, there another method to acquire Oil. Now you can choose to purchase from the people who get the allocation from NNPC, nevertheless you will to pay a premium above the NNPC’s sale value.
After you have recognized the procurement source of the oil you’ll be able to transfer further to take the possession of the cargo. The two most typical ways to buy crude oil is both by way of TTO (Tanker Take Over) or TTT (Tanker To Tanker) basis. At instances deals are additionally made on CIF (Carriage Insurance coverage & Freight) and FOB (Free on Board) basis, however TTT and TTO stay the 2 most generally accepted ways to trade crude oil.
Having taken the ownership of the cargo you are presented by two choices. You may resolve to retailer the cargo at a tank terminal and later sell it as a break bulk cargo if a worth hike is anticipated. To maintain your risk to minimum, you can too choose to promote the whole cargo in a single go; nevertheless your profits margins on this case might be lowered. Once can even select a combination of these two to stability out risk and revenue levels.