Question 1

What is an ICPO in petroleum trading?

Accepted Answer

An ICPO (Irrevocable Corporate Purchase Order) is a binding buyer commitment to purchase a specific quantity of petroleum product at agreed terms. It is issued on company letterhead, signed by authorized signatories, and cannot be cancelled without mutual consent. Sellers use the ICPO to confirm buyer intent before disclosing allocation or supply details.

Question 2

What is an LOI and when do I submit one?

Accepted Answer

An LOI (Letter of Intent) is a preliminary document expressing your interest to purchase a commodity at specified volumes and price ranges. It precedes the ICPO and is less binding. Buyers typically submit an LOI at the start of a transaction to receive a Product Availability Notice (PAN) or a Soft Corporate Offer (SCO) from the seller.

Question 3

What is an NCNDA/IMFPA and who signs it?

Accepted Answer

An NCNDA (Non-Circumvention, Non-Disclosure Agreement) protects intermediaries and ensures deal parties cannot bypass them to trade directly. The IMFPA (Irrevocable Master Fee Protection Agreement) specifies commission splits between brokers and mandate holders. Both documents are typically signed by all parties in the transaction chain before mandate and buyer/seller details are disclosed.

Question 4

What is an SPA in oil and gas transactions?

Accepted Answer

An SPA (Sales and Purchase Agreement) is the definitive contract between buyer and seller outlining all commercial terms: product specifications, volume, price formula, delivery schedule, payment terms, inspection rights, and dispute resolution. The SPA is signed after the ICPO is accepted and financial instruments are verified.

Question 5

What is a BCL and why does the seller request it?

Accepted Answer

A BCL (Bank Comfort Letter) is issued by the buyer's bank confirming that the buyer has sufficient funds or credit to complete the transaction. Sellers request a BCL early in the deal to verify buyer solvency before investing time and supply allocation. The BCL typically states the buyer's available balance or credit line without specifying the account number.

Question 6

What does EN 590 mean?

Accepted Answer

EN 590 is the European standard for automotive diesel fuel (ULSD — Ultra-Low Sulphur Diesel). It specifies properties including a maximum sulphur content of 10 ppm, cetane number ≥51, and specific density and viscosity ranges. EN 590 diesel is the standard road diesel used across Europe and many international markets.

Question 7

What is the difference between D2 and D6 diesel?

Accepted Answer

D2 (Gas Oil) is a mid-distillate petroleum product used for heating, industrial equipment, and some vehicle engines with sulphur typically under 500 ppm. D6 (Residual Fuel Oil / Bunker Fuel) is a heavier, high-viscosity fuel used primarily in ship engines and industrial boilers with much higher sulphur content. They serve entirely different end-use markets and are priced differently.

Question 8

What are Jet A1 fuel specifications?

Accepted Answer

Jet A1 is a kerosene-type aviation turbine fuel conforming to DEF STAN 91-091 and ASTM D1655 standards. Key specifications include: flash point ≥38°C, freeze point ≤-47°C, maximum sulphur 0.30% mass, smoke point ≥25mm, and specific energy ≥42.8 MJ/kg. All Jet A1 supply comes with Certificate of Analysis and ASTM test reports.

Question 9

What is LNG and how does it differ from LPG?

Accepted Answer

LNG (Liquefied Natural Gas) is natural gas cooled to -162°C to become liquid for transport, requiring cryogenic tankers and storage. LPG (Liquefied Petroleum Gas) consists of propane and butane, liquefied under moderate pressure at ambient temperature. LNG is used for large-scale power generation; LPG is used for cooking, heating, and automotive fuel.

Question 10

What is Mazut M100?

Accepted Answer

Mazut M100 is a heavy residual fuel oil produced predominantly in Russia and the former Soviet Union, conforming to GOST 10585-99 standard. It is used in industrial boilers, power plants, and ship engines. Due to its high viscosity, M100 must be preheated to 60–80°C before pumping and is typically traded in large volumes (50,000+ MT) FOB Black Sea or CIF ports.

Question 11

What is the difference between FOB and CIF in oil trading?

Accepted Answer

FOB (Free On Board) means the seller delivers the product onto the vessel at the loading port — the buyer assumes all risk, insurance, and freight costs from that point. CIF (Cost, Insurance and Freight) means the seller covers cost, insurance, and freight to the destination port. FOB is preferred by buyers with their own shipping; CIF suits buyers who want an all-in price. Both are defined by ICC Incoterms 2020.

Question 12

What does DIP AND PAY mean in petroleum transactions?

Accepted Answer

DIP AND PAY is a delivery procedure where the buyer's representative boards the vessel, verifies (dips) the cargo quantity and quality in the ship's tanks, and only pays upon confirmation. This provides the buyer direct verification before payment. It typically requires a nominated SGS or CIQ inspector and a funded escrow or ready SBLC/DLC before the vessel is cleared.

Question 13

What is ASWP in shipping terms?

Accepted Answer

ASWP (Any Safe World Port) is a shipping term indicating the cargo can be delivered to any safe, navigable port worldwide at the buyer's direction. It gives the buyer maximum flexibility to specify the discharge port after the contract is signed and is often used in large spot deals where the buyer may be reselling the cargo.

Question 14

What is an SGS report and why is it required?

Accepted Answer

An SGS (Société Générale de Surveillance) report is an independent third-party quality and quantity inspection certificate. In petroleum trading, SGS inspects the cargo at the loading port, confirms it meets contracted specifications, and certifies the loaded quantity. Most buyers require an SGS report as part of the shipping documents for payment.

Question 15

What is a Q88 form?

Accepted Answer

A Q88 is a standardized vessel questionnaire used in oil tanker vetting. It contains detailed technical information about the vessel: dimensions, cargo capacity, equipment, certificates, safety management, and inspection history. Buyers and oil majors require a completed Q88 before approving a vessel for loading, submitted through the OCIMF Vessel Inspection Database (SIRE).

Question 16

What KYC documents are required to trade petroleum?

Accepted Answer

Standard KYC (Know Your Customer) requirements include: Certificate of Incorporation, Memorandum and Articles of Association, proof of registered address, directors' government-issued photo ID, proof of business banking, company tax ID, and an authorization letter for the signing representative. For high-volume transactions over $5M, additional requirements may include audited financials and beneficial ownership declarations.

Question 17

What is AML screening in commodity trading?

Accepted Answer

AML (Anti-Money Laundering) screening verifies that buyers, sellers, intermediaries, and vessels are not on financial crime watchlists — including OFAC SDN (US), EU sanctions, UN sanctions, and HM Treasury (UK) lists. In petroleum trading, AML compliance also covers vessel screening, flag state checks, and beneficiary verification.

Question 18

Which countries or regions are subject to sanctions on petroleum trade?

Accepted Answer

Current major sanctions affecting petroleum trade include restrictions on Russia, Iran, Venezuela, North Korea, Syria, and Cuba — though specific restrictions and exemptions change regularly. US persons, EU entities, and UK-regulated parties each face different obligations. Consult legal counsel for jurisdiction-specific guidance.

Question 19

What is vessel flag state compliance?

Accepted Answer

Flag state refers to the country under whose laws and registry a vessel operates. Oil majors often maintain lists of acceptable and restricted flags. Vessels should be verified for SIRE inspection status, P&I (Protection and Indemnity) insurance coverage, and Class certificate validity before being approved for loading.

Question 20

What is an SBLC and how is it used in petroleum payments?

Accepted Answer

An SBLC (Standby Letter of Credit) is a bank guarantee of payment. The buyer's bank issues an SBLC in favour of the seller, guaranteeing payment if the buyer defaults. Upon shipment and presentation of compliant documents, the seller can draw on the SBLC. SBLCs are issued under UCP600 or ISP98 rules and are typically irrevocable.

Question 21

What is a DLC (Documentary Letter of Credit)?

Accepted Answer

A DLC (Documentary Letter of Credit) is a payment instrument where the buyer's bank commits to pay the seller upon presentation of specified shipping documents that conform to the LC terms. Unlike an SBLC (which is a backup guarantee), a DLC is the primary payment mechanism, governed by UCP600.

Question 22

What is MT760 in international trade finance?

Accepted Answer

MT760 is a SWIFT message type used by banks to transmit a guarantee or SBLC from the issuing bank to the receiving bank. When a buyer's bank issues an SBLC for a petroleum transaction, it is transmitted to the seller's bank via MT760. Requesting an MT760 has real bank costs and legal commitments attached.

Question 23

What is a BG (Bank Guarantee) in commodity trading?

Accepted Answer

A BG (Bank Guarantee) is an irrevocable commitment by a bank to pay a specified amount if the applicant fails to fulfill a contractual obligation. In petroleum trading, BGs are used as performance guarantees or payment guarantees. BG is the European/Asian convention for what is called SBLC in US/LC markets — both are transmitted via SWIFT MT760.

Question 24

What does TT payment mean and when is it used?

Accepted Answer

TT (Telegraphic Transfer) is a direct wire transfer of funds between banks, executed via SWIFT. In petroleum trading, TT payment is used for smaller transactions, advance deposits, or where both parties have an established relationship. TT is fast (1–3 business days) but provides no bank-level payment protection — the buyer transfers funds before receiving goods.

The terms you need to know.
Plain English.

Ready to start your petroleum inquiry?

The terms you need to know.Plain English.

Ready to start your petroleum inquiry?

The terms you need to know.
Plain English.