How Physical Oil Trading Works: From Cargo to Contract

Physical oil trading moves real barrels from wellhead to refinery, putting balance-sheet capital at risk across oceans, legal systems, and quality specifications. Unlike paper markets where positions settle financially against a benchmark, physical traders coordinate vessel nomination, inspection, customs clearance, and documentary payment for each cargo. A single Suezmax lot can exceed fifty million dollars in exposed value while the trader manages price exposure, demurrage, and counterparty credit without a central clearing house.

This guide walks through the complete lifecycle of a physical crude transaction. You will learn how cargo ownership differs from financial exposure, why the negotiable bill of lading drives every payment and risk decision, and how major participants from national oil companies to independent trading houses deploy capital. The article covers the regulatory line between physical forwards and derivatives, the mechanics of letter of credit settlement under UCP 600, and how crude assays determine grade value and price adjustments. You will see how Incoterms shift freight, insurance, and risk between counterparties, how Dated Brent differentials price global grades, and what cost components build a CIF invoice. By the end you will understand how physical oil trading works from cargo to contract.

What Physical Oil Trading Actually Is: Cargo, Counterparties, and Capital at Risk

Physical oil trading is the commercial transfer of title to real hydrocarbon molecules from a seller to a buyer involving the coordination of logistics, inspection, finance, and legal documentation to move a specific cargo from a load port to a discharge port. Unlike paper trading which settles financially against a benchmark index, physical trading requires the trader to assume operational responsibility for the cargo including vessel nomination, quality verification, and customs clearance. The trader puts balance-sheet capital at risk to bridge the time gap between purchasing crude at the wellhead or terminal and selling it to a refinery or another trader often thousands of miles away.

Cargo ownership versus financial exposure

Cargo ownership means the trader holds legal title to the oil documented by a negotiable bill of lading which represents the right to take delivery of the specific barrels loaded on a named vessel. This ownership creates exposure to price fluctuations during the voyage, quality disputes at the discharge port, demurrage costs if loading or discharging exceeds laytime, and the risk of counterparty default before payment is received. Financial exposure in paper markets is limited to mark-to-market variation margin on futures or swap positions settled daily through a clearing house. Physical traders must fund the full cargo value often exceeding fifty million dollars for a Suezmax lot while managing the operational risks that have no equivalent in a cash-settled contract.

Principal market participants: producers, refiners, trading houses, end-users

National oil companies such as Saudi Aramco, ADNOC, and Sonatrach act as primary sellers of state-owned production volumes often through term contracts with official selling prices. International oil companies including ExxonMobil, Shell, and TotalEnergies operate as both producers and refiners managing integrated supply chains. Independent trading houses such as Vitol, Trafigura, and Gunvor provide market liquidity by originating cargoes from producers, chartering vessels, hedging price risk, and delivering to refineries or storage terminals. Refiners ranging from large integrated majors to independent merchant refineries in Europe, Northeast Asia, and the US Gulf Coast constitute the primary demand side. End-users such as power utilities and petrochemical plants purchase refined products rather than crude but influence crude demand through product cracks.

Capital intensity and balance-sheet requirements

Physical trading demands substantial working capital to fund cargo purchases, freight payments, letters of credit fees, and hedging margin calls simultaneously. A single Very Large Crude Carrier cargo of two million barrels at eighty dollars per barrel requires one hundred sixty million dollars in purchasing power before freight and operational costs. Trading houses maintain committed bank facilities often exceeding ten billion dollars secured by cargo collateral and receivables. Credit rating agencies evaluate trading houses on gross leverage ratios, liquidity coverage, and the quality of counterparty exposure. Smaller traders operate with lower volumes using structured trade finance where the cargo itself serves as collateral for the purchase loan reducing balance-sheet consumption.

Participant Type	Typical Role	Capital Deployment	Risk Profile	Contract Preference
National Oil Companies	Primary sellers of state volumes	Low trading capital; state-backed	Sovereign credit; political risk	Term contracts with OSP formulas
International Oil Companies	Integrated producer-refiner	High; balance-sheet funded	Diversified; operational hedging	Mix of term and spot
Independent Trading Houses	Market makers; logistics providers	High; leveraged bank lines	Counterparty; price; operational	Spot; short-term; back-to-back
Independent Refiners	Crude buyers; product sellers	Moderate; inventory financing	Margin squeeze; supply security	Term for baseload; spot for optimization
End-Users (Utilities, Petrochem)	Product consumers	Low direct crude exposure	Product price; supply continuity	Product supply agreements

The table illustrates how capital intensity and risk profiles differ across the physical oil value chain. National oil companies deploy minimal trading capital because they sell sovereign production directly. Trading houses deploy the highest leveraged capital to intermediate between producers and consumers assuming the full spectrum of price, counterparty, and operational risk. Refiners balance term contracts for supply security with spot purchases to optimize feedstock costs against product cracks. Understanding these structural differences explains why trading houses maintain the largest credit lines and most sophisticated risk frameworks in the physical market.

Physical vs. Paper: Why the Distinction Dictates Every Operational Decision

The distinction between physical and paper oil trading determines the legal obligations, settlement mechanics, regulatory classification, and operational infrastructure required for every transaction. Physical trading creates a binding obligation to deliver or receive actual barrels at a specified location and time governed by sale contracts referencing Incoterms and quality specifications. Paper trading creates a financial obligation to settle the price difference between a contracted level and a benchmark index at expiry with no transfer of molecules. This fundamental difference cascades into contract design, hedging strategy, credit analysis, and compliance frameworks.

Counterparty risk and delivery obligation

Counterparty risk in physical trading encompasses the risk that the seller fails to deliver the cargo or the buyer fails to pay and take delivery. The contract remains executory until the bill of lading is presented and payment is released under a letter of credit or documentary collection. A default triggers complex legal proceedings involving cargo arrest, vessel diversion, and claims for damages including lost margin and demurrage. In paper trading counterparty risk is largely mitigated by central clearing houses which novate every trade and require initial and variation margin. The clearing house becomes the counterparty to both sides eliminating bilateral default risk on the financial leg. Physical traders must conduct deep credit due diligence on every counterparty including bank references, financial statements, and trade history because no central guarantor stands behind the physical delivery obligation.

Settlement mechanics: physical delivery vs. cash settlement

Physical settlement requires the seller to tender delivery documents including the bill of lading, certificate of origin, quality and quantity certificates, and vessel nomination notice. The buyer pays against these documents typically through a letter of credit governed by UCP 600 or ISBP 745. Title transfers when the bill of lading is endorsed to the buyer or its bank. The cargo may change hands multiple times via high-seas sales before reaching the final discharge port each requiring document endorsement and payment. Cash settlement in paper markets occurs automatically on the expiry date against the designated benchmark such as Dated Brent or WTI CMA. The exchange or clearing house calculates the settlement price and debits or credits member accounts with no documents exchanged and no logistics involved.

Regulatory treatment: MiFID II, Dodd-Frank, REMIT

Physical forwards that are commercially settled with physical delivery generally fall outside the definition of financial instruments under MiFID II in the European Union and the Commodity Exchange Act in the United States provided they meet the "commercial use" or "bona fide hedging" exemptions. However, if a physical contract is routinely settled in cash or entered into by non-commercial participants it may be reclassified as a swap or derivative triggering clearing, reporting, and margin requirements under Dodd-Frank Title VII and EMIR. REMIT in the EU requires reporting of wholesale energy market transactions including physical gas and power contracts with similar obligations emerging for oil in other jurisdictions. Trading houses maintain dedicated compliance teams to classify each contract correctly, maintain records of commercial intent, and file required reports with trade repositories and national regulators.

Dimension	Physical Trading	Paper Trading	Operational Implication
Settlement	Delivery of molecules and documents	Cash payment of price differential	Physical requires logistics, inspection, docs
Counterparty Risk	Bilateral; no central guarantor	Cleared; CCP novation	Physical demands deep credit analysis
Contract Documentation	Sale contract, charter party, L/C, B/L	ISDA, GMRA, exchange rulebook	Physical uses trade finance instruments
Regulatory Classification	Often exempt if commercial delivery	Derivative; swap; futures	Physical needs commercial intent proof
Hedging Instrument	Futures, swaps, forwards vs. physical	Futures, swaps, options	Physical hedges basis risk; paper hedges delta
Capital Requirement	Full cargo value plus margin	Initial and variation margin only	Physical ties up balance sheet for weeks

The table highlights how the physical versus paper distinction reshapes every operational workstream. Physical trading demands trade finance infrastructure, vessel chartering, inspection coordination, and documentary compliance that paper trading avoids entirely. Credit risk management shifts from monitoring clearing margin to analyzing counterparty financials and structuring payment security. Regulatory strategy requires proving commercial intent for each physical contract to maintain derivative exemptions. Hedging physical cargoes introduces basis risk between the specific crude grade and the benchmark future whereas paper positions hedge delta directly. Capital allocation differs by orders of magnitude with physical traders funding cargo values for the voyage duration while paper traders post only margin.

Anatomy of a Cargo: Grades, Assays, and the Quality Ladder

Crude oil grades are classified primarily by API gravity and sulfur content which together define where a cargo sits on the quality ladder from light sweet to heavy sour. Light sweet crudes typically yield higher volumes of valuable light products such as gasoline and jet fuel while heavy sour grades produce more residue and require complex refining configurations. Saudi Arabia's crude and condensate exports were 38% (5.5 million b/d) of total Hormuz crude flows in 2024 according to U.S. EIA. Refiners select grades based on their specific process units and product slate targets making the assay certificate the single most important quality document in physical trading.

Light sweet versus heavy sour classification

Light sweet versus heavy sour classification divides the crude universe into four broad quadrants using API gravity and sulfur weight percent as axes. Light crude exceeds 31.1 degrees API while heavy crude falls below 22.3 degrees API. Sweet crude contains less than 0.5 percent sulfur while sour crude exceeds that threshold. A light sweet cargo such as Bonny Light commands a premium because it yields 50 to 60 percent naphtha and gasoline cuts with minimal desulfurization cost. Heavy sour grades like Basrah Heavy yield 40 percent or more atmospheric residue requiring coking or hydrocracking investment. Traders match cargo specifications to refinery complexity indices to maximize margin and avoid processing bottlenecks.

Key assay cuts: naphtha, kerosene, gasoil, residue yields

Key assay cuts naphtha kerosene gasoil residue yields are reported in a full crude assay which breaks the barrel into boiling range fractions typically measured at 10 degree Celsius intervals. The naphtha cut up to 180 degrees Celsius feeds petrochemical crackers and gasoline blending pools. The kerosene cut 180 to 240 degrees Celsius determines jet fuel yield. The gasoil cut 240 to 370 degrees Celsius drives diesel and heating oil output. The residue cut above 370 degrees Celsius goes to vacuum distillation or coking. A cargo assay also reports metals content such as nickel and vanadium which poison FCC catalysts and TAN acid number which drives corrosion risk. Traders compare assay yields against refinery linear programming models to calculate the marginal value of each grade.

Quality adjustments and price differentials for off-spec cargoes

Quality adjustments and price differentials for off-spec cargoes are negotiated through the sale and purchase contract using predefined formulas linked to assay deviations. If actual sulfur exceeds the contractual maximum the seller may concede a price reduction depending on market tightness. High TAN or mercury content can trigger larger discounts or rejection rights. Independent inspectors such as Intertek or SGS issue shore tank and vessel composite certificates at load and discharge ports. Disputes are resolved through umpire analysis clauses referencing ASTM or IP test methods. Traders build quality optionality into term contracts by specifying acceptable grade ranges and adjustment mechanisms that protect margin when assays shift seasonally.

Incoterms & Pricing Mechanics: From Dated Brent to FOB/CIF Differentials

Incoterms define the exact point where cost risk and title transfer from seller to buyer and they structure the freight insurance and finance components that build up a CIF price from a FOB basis. FOB places risk transfer at the vessel rail at the load port while CIF extends seller responsibility to the discharge port including marine insurance. DES and DAP shift further obligations to the buyer premises. Crude oil and oil products flowing around the Cape of Good Hope rose to 9.2 million b/d in the first eight months of 2024 from 6.0 million b/d in 2023 according to U.S. EIA extending voyage durations and increasing the freight component in CIF calculations for many Atlantic to Asia routes.

Incoterms responsibility matrix for FOB CIF DES

Incoterms responsibility matrix for FOB CIF DES allocates specific obligations across the logistics chain. Under FOB the seller pays for loading costs and export clearance while the buyer arranges and pays for the vessel freight and import clearance. Under CIF the seller additionally procures minimum marine insurance coverage Institute Cargo Clauses C and pays freight to the named discharge port. DES delivered ex ship requires the seller to bear all costs and risks until the vessel arrives at the discharge port berth. DAP delivered at place extends seller responsibility to the buyer named premises excluding import duties. Each term shifts the freight exposure demurrage risk and insurance cost between counterparties and determines which party books the vessel and controls the bill of lading issuance.

Dated Brent Brent BFOE and marker crude methodology

Dated Brent Brent BFOE and marker crude methodology underpin the pricing of physical crude trades worldwide. Dated Brent reflects the assessed value of cargoes loading 10 to 25 days forward in the North Sea BFOE basket which comprises Brent Forties Oseberg Ekofisk and Troll streams. Platts publishes daily assessments for each component stream and a weighted average basket price. Traders apply a differential to Dated Brent to price other grades such as Bonny Light at Dated Brent plus 2.50 or Urals at Dated Brent minus 15.00 depending on quality and logistics. The differential captures the grade quality adjustment freight economics and regional supply demand balance. Term contracts often reference the monthly average of daily Dated Brent assessments plus a fixed or floating differential.

Freight insurance and finance components in CIF build-up

Freight insurance and finance components in CIF build-up transform a FOB price into a delivered cost. The freight element is calculated on Worldscale flat rates multiplied by the applicable WS multiplier for the route and vessel size plus any warp premium for off-route loading. Insurance typically costs 0.1 to 0.2 percent of the cargo value under Institute Cargo Clauses C covering total loss and general average. Finance costs include the seller cost of funds for the voyage duration often 30 to 45 days from bill of lading date to payment receipt under a letter of credit. The buyer must also account for demurrage exposure at the discharge port which can add 15000 to 30000 per day for a Suezmax. These components are itemized in the commercial invoice supporting the letter of credit presentation.

Incoterm	Risk Transfer Point	Seller Pays Freight	Seller Pays Insurance	Export Clearance	Import Clearance
FOB	Vessel rail at load port	No	No	Seller	Buyer
CIF	Vessel rail at load port	Yes to discharge port	Yes minimum cover	Seller	Buyer
DES	Discharge port berth	Yes to discharge port	Yes customary	Seller	Buyer
DAP	Buyer named premises	Yes to premises	Yes customary	Seller	Buyer

The table shows how risk transfer remains at the load port vessel rail for both FOB and CIF while DES and DAP shift risk to the discharge destination. Seller freight obligation starts at CIF and extends through DES to DAP. Insurance obligation follows the same pattern. Export clearance always sits with the seller while import clearance always sits with the buyer regardless of the Incoterm chosen. This matrix drives the documentary requirements for letters of credit and determines which party controls the bill of lading and the shipping instructions.

The Platts MOC: How the Benchmark Price Is Discovered Every Day

MOC submission window and trade types accepted

The Platts Market on Close assessment runs from 16:15 to 16:30 London time each business day when operators submit firm bids offers and confirmed trades for North Sea cargoes loading 10 to 25 days forward. Standard size cargoes on a gross basis qualify and the trade types accepted include outright cargo swaps contracts for difference and physical forwards. Submissions must specify grade loading window and price differential to Dated Brent. The window is strict; any submission timestamped after 16:30 is excluded from that day's assessment. Platts editors then apply a repeatable methodology weighting the most liquid instruments to produce the daily value.

North Sea cargo eligibility: Brent, Forties, Oseberg, Ekofisk, Troll

The basket comprises five crude streams: Brent Forties Oseberg Ekofisk and Troll. Each cargo must load at the named terminal within the forward window and meet the quality specifications published in the Platts guide. Brent and Forties typically dominate volume while Oseberg Ekofisk and Troll provide depth when the core grades are scarce. A cargo nominated as Brent blend for example must originate from the Brent field and conform to the assay on file. This fixed eligibility list ensures the benchmark reflects a consistent physical reality rather than a shifting mix of substitutes.

From MOC assessments to Dated Brent and CFD settlement

The MOC process yields individual grade assessments which are then averaged to produce the Dated Brent price published at 16:30. This Dated Brent value becomes the settlement reference for the ICE Brent futures contract at expiry and for the vast majority of term contracts worldwide. Contracts for difference referencing Dated Brent allow participants to hedge the floating price component without taking physical delivery. The linkage between the physical MOC window and the financial settlement curve is what makes Brent the global marker for light sweet crude.

Trade Lifecycle Walk-Through: A 2 Mbbl Bonny Light Cargo from Nigeria to India

Term sheet negotiation and purchase contract execution

The term sheet negotiation and purchase contract execution phase begins when the buyer and seller agree on the key commercial terms for the 2 million barrel Bonny Light cargo. The term sheet captures grade volume loading window laycan pricing formula based on Dated Brent plus a quality differential payment terms and Incoterms typically FOB Bonny terminal. Once the term sheet is signed the parties convert it into a long form sale and purchase agreement referencing the General Terms and Conditions of the seller. The contract specifies the bill of lading quantity tolerance the quality parameters from the latest assay the force majeure provisions and the arbitration clause usually ICC in London or Paris. Legal teams on both sides review the document before authorised signatories execute it. The executed contract triggers the buyer's trade finance team to open the letter of credit.

Letter of Credit issuance and vessel nomination

The letter of credit issuance and vessel nomination stage sees the buyer's bank issue an irrevocable confirmed letter of credit under UCP 600 for the estimated invoice value plus a margin. The L/C calls for a full set of clean on board bills of lading the certificate of origin the quality and quantity certificates issued by the independent inspector and the commercial invoice. The seller nominates a suitable vessel typically a Suezmax given the cargo size and the draft restrictions at Bonny. The vessel nomination must be accepted by the buyer within the contractual notice period usually 48 hours. The charter party is concluded on Worldscale terms and the voyage instructions are issued to the master. Oil flow through the Strait of Hormuz averaged 20 million barrels per day in 2024 about 20% of global petroleum liquids consumption according to U.S. EIA highlighting the strategic importance of the route the vessel will transit.

Load port operations, voyage management, and discharge verification

The load port operations voyage management and discharge verification phase covers the physical movement from Bonny to the Indian discharge port. At Bonny the vessel tenders notice of readiness the independent inspector boards to witness the shore tank gauging and the loading commences. The bill of lading is issued upon completion showing the loaded quantity and the quality certificate reflects the ship composite sample. During the voyage the trader monitors AIS tracking manages any high seas sale requests and ensures the vessel follows the approved route. At the discharge port the inspector repeats the gauging and sampling. Any quantity or quality discrepancy triggers a note of protest and a claim calculation. Demurrage is settled based on the laytime statement. Final documents are presented to the negotiating bank payment is released and the P&L is booked against the hedged position.

Milestone	Document	Responsible Party	Key Risk
Contract Execution	Sale Purchase Agreement	Legal Teams	Terms mismatch
Trade Finance	Letter of Credit UCP 600	Buyer Bank Seller Bank	Document discrepancy
Vessel Nomination	Charter Party Worldscale	Charterer Broker	Vessel delay
Load Port	Bill of Lading Quality Certificate	Inspector Seller	Quality off spec
Voyage	Voyage Instructions AIS Log	Operator Trader	Route deviation
Discharge Port	Outturn Report Note of Protest	Inspector Buyer	Quantity loss demurrage
Settlement	Commercial Invoice Final Payment	Banks Trading Desk	Payment delay P&L variance

The table maps each lifecycle milestone to the critical document the responsible party and the key risk that operators monitor. Contract execution risk centers on terms mismatch between the term sheet and the long form agreement. Trade finance risk is dominated by document discrepancy under the letter of credit. Vessel nomination risk appears as vessel delay which can cascade into laycan breach. Load port risk is quality off spec which may trigger rejection or price reopener. Voyage risk includes route deviation that can affect freight cost and delivery timing. Discharge port risk combines quantity loss and demurrage exposure. Settlement risk covers payment delay and the final mark to market variance against the hedged position.

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Related reading: Basrah Heavy Crude Oil: Full Export Specifications.

Conclusion

Physical oil trading demands mastery of the full cargo lifecycle from vessel nomination and inspection certificates through bill of lading endorsement and UCP 600 letter of credit settlement. Every transaction requires the trader to fund cargo value, manage demurrage exposure, verify quality against assay specifications, and confirm counterparty creditworthiness without a central clearing house. Understanding how Dated Brent differentials price global grades and how Incoterms allocate freight, insurance, and risk enables precise CIF invoice construction and dispute avoidance.

Apply these mechanics to your next deal by structuring contracts with clear commercial intent language to preserve physical forward exemptions, securing inspection appointments with Intertek or SGS at both load and discharge ports, and aligning bank facilities to the 30 to 45 day voyage financing window. Start by reviewing your current trade finance documentation against the documentary requirements outlined here then explore counterparty discovery channels on https://globaltradeplaza.com/.

Frequently Asked Questions

How does physical commodity trading work?

Physical commodity trading transfers legal title to real cargoes through coordinated logistics, inspection, and documentary payment. The seller loads a specific lot onto a nominated vessel and presents a negotiable bill of lading with quality and quantity certificates. The buyer pays against these documents, typically via a letter of credit, and takes title upon endorsement of the bill of lading.

How does trading oil work?

Oil trading matches crude supply from producers with demand from refiners through spot or term contracts priced against benchmarks like Dated Brent. Traders charter tankers, appoint independent inspectors at load and discharge ports, and manage title transfer via bills of lading. Each cargo requires financing, hedging, and compliance with customs and sanctions regimes across the voyage.

What is the difference between physical and paper oil trading?

Physical trading obligates delivery of actual barrels and transfer of title documented by a bill of lading, exposing the trader to logistics, quality, and counterparty default risk. Paper trading creates only a financial obligation to settle the price difference against a benchmark index at expiry, with no molecules moving and risk largely mitigated by central clearing houses.

How is the price of physical crude oil determined?

Physical crude prices are set as a differential to a benchmark such as Dated Brent or WTI, adjusted for crude quality via assay yields, freight cost to the destination, and prevailing supply-demand fundamentals. Sellers and buyers negotiate the differential based on grade desirability, refinery economics, and competitive alternatives available in the market window.

What is Dated Brent and how does the Platts MOC work?

Dated Brent is the Platts assessed value of North Sea BFOE cargoes loading 10 to 25 days forward, underpinning over 60 percent of global physical crude pricing. The Market on Close process collects bids, offers, and trades for partials and full cargoes during a defined window, then applies a published methodology to derive the daily assessment.

What are the main Incoterms used in oil trading (FOB, CIF, DES)?

FOB places risk and cost on the buyer once cargo crosses the ship's rail at the load port, requiring the buyer to charter the vessel. CIF obliges the seller to contract and pay for freight and minimum Institute Cargo Clauses C insurance to the named discharge port. DES, now replaced by DAP and DPU under Incoterms 2020, required the seller to bear risk until the vessel arrived at the discharge port.

How does a Letter of Credit work in oil trading?

A letter of credit is a bank undertaking to pay the seller upon presentation of compliant documents including the bill of lading, certificate of origin, and inspection certificates. The buyer's issuing bank honors or negotiates under UCP 600 once documents meet the credit terms, shifting payment risk from the buyer's commercial credit to the bank's obligation.

What is Worldscale and how are freight rates calculated?

Worldscale publishes annual flat rates for standard tanker routes expressed as Worldscale 100. The actual freight cost is calculated by multiplying the flat rate by the agreed Worldscale multiplier (e.g., WS150 equals 1.5 times the flat rate) and adjusting for vessel size, port costs, and any applicable surcharges such as war risk or canal tolls.

What is a Bill of Lading and when does title transfer?

A bill of lading is a receipt for cargo, evidence of the contract of carriage, and a document of title when issued in negotiable form. Title transfers when the holder endorses the original bill of lading to the buyer or its bank, typically against payment under a letter of credit, enabling high-seas sales during the voyage.

What is laytime and demurrage in tanker chartering?

Laytime is the agreed period allowed for loading and discharging without extra cost, calculated from the Notice of Readiness tender. Demurrage is the daily charge payable by the charterer to the owner for time used beyond laytime, while despatch may be paid by the owner for time saved, both governed by the charter party terms.

How do traders hedge physical cargoes with futures and swaps?

Traders sell futures or enter fixed-price swaps against the physical purchase to lock in a margin, then unwind the hedge as the cargo is priced or sold. The hedge volume matches the cargo size and timing, with basis risk managed by selecting the benchmark correlating closest to the physical grade and delivery period.

What are the main risks in physical oil trading?

Key risks include price exposure during the voyage, counterparty default before payment or delivery, quality disputes at discharge, demurrage costs from port delays, and sanctions or regulatory compliance failures. Traders mitigate these through hedging, credit due diligence, independent inspection, tight charter party terms, and dedicated compliance screening of every counterparty and vessel.

Sources

• U.S. EIA (2024): Strait of Hormuz oil flows
• U.S. EIA (January-August 2024): Cape of Good Hope oil flows