Practice
Physical supply, execution, and opening routes that do not exist yet.
Mundoverde is a boutique oil and gas trading house. It does not trade outside oil and gas, and it is not trying to. Within that book, three capabilities that come down to the same thing: moving barrels and molecules from a party that has them to a party that will pay for them, on terms both can live with when the market turns.
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01
Physical supply
Sourcing cargoes against a specification the buyer has signed.
A supply mandate starts with a specification, not a price. Grade or product, limits with their test methods, quantity and its tolerance, the delivery basis with its named port, the pricing period and the inspection standard are all agreed before a seller is approached. Every one of them is a ground on which a cargo can later be rejected.
Sellers are then checked against that specification: that the entity exists, that it holds what it says it holds, that it has lifted at this size before, and that neither it nor its owners appear on a list that would make the transaction unlawful.
- Basis
- Principal or agency, agreed per mandate
- Specification
- Written and countersigned before sourcing begins
- Cargo sizes
- Detail not yet confirmed: Typical cargo sizes. [•]
- Inspection
- Petroleum inspection by SGS, Bureau Veritas, Intertek, AmSpec or Saybolt, appointed jointly or nominated by the buyer
- Delivery terms
- Incoterms 2020
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02
Trade execution
Carrying a cargo from contract to conforming documents.
Execution is document work with a vessel attached. The contract, the credit and the shipping documents have to agree with one another exactly, and a discrepancy found at the bank counter costs demurrage and standing; the same discrepancy found at the desk costs an email.
Vessel nomination is part of that work rather than a formality. Ownership, flag, class, cover and recent movements are reviewed before a nomination is accepted, because the cargo is only as clean as the ship that lifts it.
- Instruments
- Detail not yet confirmed: Payment instruments accepted. [•]
- Vessel screening
- Detail not yet confirmed: Vessel screening basis. [•]
- Documents
- Certificate of quality, certificate of quantity, bill of lading, certificate of origin, and the attestations the route requires
- Insurance
- Detail not yet confirmed: Cargo insurance basis. [•]
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03
Market access
Opening a supply route that does not exist, and proving it with a first cargo.
A new route fails on detail: a product specification the destination will not accept, a terminal that cannot take the parcel size, an import licence nobody checked, a bank that will not confirm the issuing bank. All of these are knowable before a vessel is fixed.
We work the requirements backwards from the discharge terminal, then run a first cargo small enough that being wrong is survivable and large enough that being right proves something to the counterparties who come after.
- Origin markets
- Detail not yet confirmed: Origin markets. [•]
- Destination markets
- Detail not yet confirmed: Destination markets. [•]
- Years operating
- Detail not yet confirmed: Years operating. [•]
04Common to all three
The same five stages, whichever capability is engaged.
- 01OriginationCargo secured and the seller checked.
- 02InspectionQuality and quantity fixed at the load port.
- 03ShipmentVessel screened, documents raised to match.
- 04FinancingInstrument read in full before loading.
- 05DeliveryCargo released against conforming documents.