PROFESSIONAL COMMODITY TRADER
TRADING www.ftnx.net EDUCATION www.smice.net www.ftnexporting.com EMAIL firstname.lastname@example.org
SWEET CRUDE OIL AND FUEL TRANSACTIONS
Please note FTNX advance trading procedures specified below are only for established export ready suppliers to consider. New exporters as per normal procedures will need to discuss the matter of supply with FTNX first via email. FTNX buys and sell crude oil and related products as a ‘buyer’ in its own name, then ships the ordered product from country of origin. FTNX is only interested in the purchase of ‘sweet’ crude oil grades. FTNX cannot consider buying such products from countries holding sanctions with Australia or USA. FTNX is continually sourcing supply of wanted products. In return for buying such large quantities, the supplier secures an extra sale that they would not have secured otherwise, may be assumed. Other purchase and price basis beyond what is stated below may also be considered. FTNX in unable to buy crude oil and fuels using in-house procedures offered by most primary producers or refineries. The often cited ‘Aramco’ contract basis is designed to be used by registered end buyers who are actual end users as well. In law, we are ‘buyers’ but not ‘end users.’ As such, the in-house procedures that most primary producers apply cannot accommodate to service our requirements. As for secondary market suppliers, FTNX is able to consider such purchases on the condition that the actual supplier in possession of goods is apparent and disclosed upfront with a signed offer. Once a long term offer (or MOU) is secured, the supplier /producer will not hear from FTNX until we are ready to make the purchase, as these kind of specialised deals take up to 6 months or even longer to prepare and secure funds for not including time spent to finalise and secure supply. FTNX is a specialised trader, accordingly secondary or even primary suppliers is possession of goods may provide FTNX with long term assurance of supply on the condition that some basic and reasonably sound understandings are first met. This process saves everyone a lot of time and angst. Below describes such basic ‘understandings.’ In the case of fuels and crude oil; 3 to 7 year revolving contract of supply is sought. In the case of LNG supply, a possible long term association of 10 years could be established with FTNX at FAS ICC Incoterms, when the offer for LNG is first served, in were FTNX will respond when required, with particulars of destination when the contract is sought in converting the FAS aspect to CIF ICC Incoterms 2020. Shipment of 250,000 cubic metres plus of cleaned LNG is expected. (Exceeding 200,000 MT plus, net shipments) priced at per MMBtu.
FTNX is also interested in long term supply and revolving shipments of petroleum and refined fuels (Related byproducts are considered on merit; Hydrated Ethanol, Naphtha, AGO, MGO, Bitumen etc.etc.) at FOB ICC Incoterms 2020. If the FOB basis is accepted, we will arrange for all matters to do with shipping, unless CIF delivery is later sought. All on board weight must be expressed in metric tons. Payment is made prior to any delivery with the issuance of a DLC made for ‘at sight’ collection in accordance with current ICC UCP banking rules. Collection proceedings apply at current ICC URC collection rules. We expect a ship to be loaded, and an independent PSI type of analysis and certification sought, to be included with the price of goods offered. All expense associated with loading at POL up to the ships connecting manifold is an expense of the supplier. Supplier is paid upon ship loading being completed POL on the clean production of presentation documents as specified on the DLC. No BCL, registrations, financial records, forms, security deposit, disclosure of our customers or any other improper requests will be entertained, as we are traders not end users. The only exemption we will consider; if the supplier has advised us (in writing) that supply is assured on condition that the product offered by the supplier is not sold to FTNX clients located in certain named countries, FTNX would abide by such a request. An assurance of supply (AOS or OFFER) must be ‘cleanly’ served, without extraordinary in-house conditions being imposed. FTNX is an international trade expert, and will not take shortcuts nor apply risk laden procedures. All leading banks in Australia are top 100 ranked banks of the world; our DLC is supported accordingly. A confirmed DLC will only be advised, if this top ranking aspect is not apparent. Documents are cleanly represented to our bank for payment to be collected. ICA (Instantaneous Contract Application ) and eUCP may apply. Contracts may be advised by email , but must be posted as a hardcopy, by FTNX once the offer is signed and returned via email. This is what we mean by an ‘ICA’ transaction. The term ‘eUCP’ implies that no hardcopy documents is served by airmail, and that such documents may be presented electronically, bank to bank.
The often used ‘day before, day on and day after loading’ average price application and basis therein cannot be used by FTNX is generally assumed, because an operational DLC with a pre set VALUE to pay for goods must be issued within 7 days of contract returning, in where first delivery is 30 days later, as it falls to the ‘next 15th day’ off the month.This strict routine must be applied to ensure good cleans deliveries and payment take place and to offset delays and the costly added expense of issuing amendments often to the DLC. All processing and loading operations must be expressed as Metric Tons, once BBL to MT conversion factor is made apparent plus or minus 10% ( This ‘-/+’ factor is a UCP letter of credit rule) Our DLC will have a ‘Plus or Minus 5.0% tolerance factor’ to matters of payment (another universal bank rule under UCP) ensuring amendment are kept to a minimum as needed.
All delivery dates applied on contract must lead to first delivery date to settled of the 15th day of the month, to ensure no conflict with consecutive deliveries being delayed due to annual end of the year Christmas festivities, as enacted upon in many countries world wide. Our long experience in the market place dictates as much.
As for pricing methodology, please see further below for our standard basis. FTNX cannot buy on the SPOT products. FTNX buys products for future deliveries. From 2020 FTNX only uses BRENT price basis in the first instance, for all crude oil transactions. FTNX has a reputation for making ‘complex matters’ simple to understand and apply. Below is our price basis.
(A) FTNX FLOATING PRICE BASIS AND DISCOUNT PER MT
A floating (Aka: Variable) price basis at discount to world price basis is always considered intently.
Typical Example: As per Brent price basis, as taken 12.01 PM AEST or before, as apparent on the 15th of January 2020, and every month thereafter on the same date and time, less US$ 25.00 per MT.etc.etc. The Buyer and Seller agrees to use the following website to track prices. https://www.bloomberg.com/energy
Note: This is the preferred standard trading aspect for all commodities . The price is taken on the 15th of January and applied to first delivery 30 days later. This specific price basis then moves forward on the same premise for all subsequent revolving deliveries. ( Prices basis set 30 days prior to delivery )
(B) FTNX FLOATING PRICE BASIS AND PREMIUM PER MT
A floating basis with an added fixed premium applied outright are also considered at times of short supply.
Typical Example: As per Brent price basis, as taken 12.01 PM AEST or before, 15th of January 2020, and every month thereafter on the same date and time, plus a fixed premium of US$ 10.00 per MT .etc.etc. The Buyer and Seller agrees to use the following website to track prices. https://www.bloomberg.com/energy ( Prices basis set 30 days prior to delivery applies )
(C) FTNX FLOATING PRICE BASIS AND MITIGATION FACTOR
A floating basis with an added fixed premium or discount or both applies outright are also considered at times which may or may not include a mitigation factor favouring the supplier.
Typical Example: As per Brent price basis, as taken PM AEST or before, 15th of January 2020, and every month thereafter on the same date and time, less US$ 30.00 dollar per MT discount, plus a fixed premium added to the price after the discount has been accounted for, at the fixed rate of 1.25% per MT premium as per brice basis taken. etc.etc. The Buyer and Seller agrees to use the following website to track prices.
https://www.bloomberg.com/energy (Prices basis set 30 days prior to delivery applies )
(D) FTNX FIXED PRICE BASIS AND MITIGATION FACTOR
A fixed price basis with an added mitigation factor is also a preferred aspect as per factor agreed upon by the buyer and seller at the time
Typical Example: As per Brents price basis, as taken PM AEST or before, 15th of January 2020, and every month thereafter on the same date and time, less US$ 30.00 dollar per MT discount, plus a fixed mitigation factor. Should a current tracked price taken exceed the price paid for the delivery prior, by a mitigation factor US$ 8.00 per MT or more , the buyer agrees to pay the supplier and added premium for the delivery being finalised, at a rate of 50% of the difference, to favour the supplier. Should the price fall by the same amount as assessed against the delivery prior, the buyer will accept a further discount of 25% of the differential declared to be over the said Mitigation factor rate. The Buyer and Seller agrees to use the following website to track prices. https://www.bloomberg.com/energy
(Prices basis 30 days prior to delivery applies )
(E) FIXED PRICE BASIS
A straight forward fixed price basis for revolving deliveries 5 years or more considered intently regardless if a fixed premium is applied to cause the price to be much ‘higher’ as per benchmarked prices. Example: FTNX would accept a 6 year offer for ‘Sweet crude oil’ at the Brent benchmarked price secured at the time the offer was made plus a fixed 18% price loading (premium) for a fixed price contract. At the time of writing, if an offer was being advised, at the Brent price of US$ 455.18 per MT FOB would have been apparent, plus US$ 81.94 per MT. The FTNX buy price would be fixed for the life of supply at US$ 537.12 Per MT FOB and be supported by a DLC carrying the whole contract value defines the kind of transactions we specialise in. Supplier to indicate what kind of premium they are seeking.
The above pricing aspect is able to be varied using a mixture of above factors as agreed upon with FTNX and the Seller (the disclosed supplier in possession of export ready goods). A fixed price basis is always a well sought after aspect. The ‘Prices basis set 30 days prior to delivery applies’ is an aspect that cannot be changed. Should the supplier require the DLC to apply as a localised instrument, an application is made with their own bank to have the DLC confirmed at their expense as per the policy of the bank used by the supplier. This expense will include the Confirmation fee, DLC Transfer fee and BCL fee, if such is sought, as well as added bank charges. The supplier may then produce all documents stipulated on the DLC as per current UCP rules attached, to their own local bank and obtain payment immediately (within the 5 banking days ) without the need to produce, deliver and wait for the presentation documents to be accepted by our Australian advising bank. Leading banks of the world do need their credit to be confirmed as such we will not incur such unwarranted expenses when it’s not necessary. The supplier looking to save around ten banking days on matters of collecting on the DLC, may make the decision to have the DLC confirmed at their expense. The country of the supplier is where serious disputes are heard. FTNX avoids costly matters of litigation at any cost by working intently with the supplier to remedy any adverse situation, regardless on who was at fault. This is how FTNX prefers to conduct business.
Please send your confidential enquiry directly to FTNX via email.