PROFESSIONAL COMMODITY TRADER
TRADING www.ftnx.net EDUCATION www.smice.net www.ftnexporting.com EMAIL firstname.lastname@example.org
CRUDE AND FUEL OIL TRANSACTIONS
Advice to suppliers and PCT’s world wide:
Personal opinion of the Author served without prejudice .
Posted: March 9, 2020.
FTN Exporting has met many suppliers of crude oil over a 30 year period, more so in the last few years as we attempt to complete our second publication to do with crude oil and fuel sales and the Professional Commodity Trader (PCT). A few issues that seem to be always be apparent with primary suppliers is the idea that since said suppliers are already ‘supplying’ the world with such products, why shroud they allow a PCT to supply a ‘new customer’ who at one time was a customer of the supplier anyway. The other main issues are to do with sanctions laws and money laundering which often requires for the PCT to submit a ‘whole lot of forms’ to qualify for supply; which a PCT cannot submit as we are buyers, and not end users of the products sought. A PCT does not have ‘a few billions’ dollars spare to satisfy the financial information often sought on such forms and as often required, and the PCT will not disclose our end buyers (our clients) in meeting with the ‘intrusive’ demands sought on such forms. In short, primary suppliers will not supply of crude oil to an intermediary or even a highly informed PCT may be assumed. OPEC members are deemed to be primary suppliers. Crude oil supplier world wide from around 90 countries;30% are not OPEC members. We call these suppliers ‘secondary market’ suppliers . Unlike most think, most secondary suppliers also often suffer from ‘the sickness of the forms.’ Primary and Secondary suppliers may have streamlined the way they do business, but in essence have not actually changed the way of doing business for around a century. With crude prices being so low one would think that a crude oil supplier would be eager to secure a large contract. No so! Crude prices serves a political agenda as well a speculative market place and imputation from other ‘investments’ like i.e: Pension funds and the likes. As for Sanctions? What happened to the so called ‘rule of law.’ Sanctions and Tariffs are the tools used by weak minded politicians and Governments in serving an easy way out of a complex issue, in pretending that they are doing ‘something’ when in fact what they are doing is destroying international business potential.
FTN Exporting often receives offers for the supply of crude oil which we dismiss ‘in 30 seconds flat’ as our long experience is able to identify ‘no hope deals’ quickly. We get very few ‘real’ supply of crude oil. The internet has more crude oil and fuels on offer in any given day , that the world is able to produce in a year; such offers as made by ill informed intermediaries and traders. As for the highly informed Top 200 ranked FTNX endorsed PCT associated deals; FTN Exporting has only ever seen two or three genuine crude oil suppliers and supporting offers since 2010. One was from Mexico and the others from Russia; both had accepted FTN exporting formidable procedures while is the same period of time oil giants that we have approached, were complimenting FTN Exporting about our structure and trading procedures which bring us to the next point in contention and specific reason why such suppliers claim we need to follow their ‘strict’ process. Supplier often cite that issues of ‘Sanctions and Money Laundering’ are the biggest issues they need to address and that “if a PCT does not disclose everything upfront” no offer supporting supply is possible, to which the following insight is now served accordingly.
- A quick look at court litigation around the world, crude /fuel suppliers and end buyers lead the way.
- For all their so called strict ’formalities’ process and procedures, legal challenges are often apparent.
- FTNX has provided opinion in legal cases to do with illegal crude oil sales out of Iraq, to a intermediary breaking UN sanctions. One aspect become clear was the way improper payments for such supply were made
- Money Laundering and POCA ( Proceeds of Crime Act) issues (excuses) will nearly always involve suspicious and improper payment methods.
- We were unable to find one case proper where money laundering and sanction issues were apparent when a UCP 600 endorsed DLC was used as the payment instrument.Why?
To begin with Paragraph (4) defines that a “Buyer” such as FTN Exporting buying crude oil from lets say Russian producers where financial Sanction are in place with USA would instantly record a failed deal, once our bank in Australia receives instructions to transfer the financial instrument, to pay for such goods. Our bank a leading top 100 ranked bank of the world will not touch such a DLC while such Sanctions are in place. All banks world wide (Over 90%) adhering to ICC UCP rules apply the same aspect. But it goes beyond that, as recently seen in the Rosneft case (Breach of UN Sanctions) and an American company serving invoices on its behalf; if a company even serves ‘assistance’ to a supplier in a sanctioned country with no involvement is the underlying contact of sale, penalties and severe consequences will follow.
If FTN Exporting is paying for goods using a UCP 600 ruling DLC, and the supplier (Its bank) from a non sanctioned country is where acceptance of the DLC is to take place, then this one act alone precludes the idea that practices pertaining to money laundering is taking place or that a deal with a country holding Sanction with USA is in effect. How clear its that ? Unless FTNX acts differently, it cannot enter into such illegal deals. Its bank assures as much as a matter of law. Trying to state as much to a crude oil supplier is often a waste of time.Mist are very ware of this aspect related to payments. The same protective aspect is not available when other forms of payment are apparent; especially when a SLC and not DLC is used, which bring us back to the qualifying aspect sought by suppliers is not warranted and that the only reason such demands are made is more to do with circumvention, than good safe practices. In the earlier years pre 2001 FTNX did abide by, on at least 3 occasions, with supplier’s formalities. We gave them first class bank supported qualifying information (BCL) and disclosed our end buyer, only to be told 4 weeks later that they were ‘unable to supply us.’ So there is no guarantee of supply, even if FTNX qualifies, and meets the demands sought. As stated such aspects are not warranted all because we are asking for quote or offer . A supplier can ask for anything they like (they get the PPIC anyway once the contract is signed) AFTER the offer is accepted by the PCT as a matter of contract. But suppliers will not provide the offer or quote to begin with, therefore such an aspect cannot be tested. They cannot readily assess the difference between an ill informed intermediary and an informed PCT or end user and ‘Buyer’ is a truism, especially when you consider the many idiotic traders hounding such supplier for decades with no potential of a deal eventuating.
Unless this one attitude changes injudicious and ‘suspect’ suppliers in general will not supply a PCT with crude oil may be assumed. The only hope to secure such crude oil is from a non opec producer or third party trading houses who has already met the suppliers pre qualifying demands. Securing processed fuels is by far the better option as all the adverse aspects applied the supply of crude oil is diminished once by-products are formed form such, albeit other ‘doable’ issues will arise. There are many smaller countries looking for such refined products and will pay a good premium to have deliveries occur monthly. Large fuel suppliers are not interested is serving small shipment to end buyers located in small countries.
A PCT must spend less time trying to source Crude oil and should place much more efforts in securing refined fuels is the proper trading aspect. Crude oil like LNG deals are tested only when presented and dismissed accordingly 95% of the time as fake . D2 and Kerosene are the best refined product for a PCT to source. A PCT cannot waste many months needed to secure a bone-fide crude oil deal unless an offer is served by an export ready supplier and that such crude oil deals apply ICC FOB delivery rules is now the standards perspective as far as the PCT is concerned. We leave the crude oil market place for ill informed intermediaries to ‘play in.’