Full Question:

I understand that when crude oil is being shipped on tankers, while it is in transit the crude oil on board may be purchased and sold again a few times – sold on the spot market. How do deals like that work between a purchaser and seller? Who actually owns the crude oil and when does ownership of the crude get reassigned?

Answer:

I won’t be able to clarify the entire bigger picture since this would mean quite a bit of learning curve for you – however, I can make additional information available to you in capitalization and this should prove pretty helpful and expand upon your thoughts. Even my simplest reply will take me some time.

I have been investigating the process of the purchase and sale of crude oil while on freight tankers.

IS YOUR INVESTIGATION AS AN INTERMEDIATE PURCHASER OR SELLER? ARE YOU TAKING A CLASS AT SCHOOL ON THE SUBJECT? THIS HAS NO BEARING SINCE THE SUBJECT TOPIC IS FAR TO COMPLICATED ANYWAY.

THEREFORE MY FOLLOWING ADVICE IS ONLY APPLICABLE TO INTERMEDIARIES

As I understand it, during the transit of the crude oil by tanker the crude might be sold on the spot market

THIS WOULD APPLY TO SECONDARY CONTRACT MARKET SINCE INTERMEDIARIES CANNOT MAKE TRANSACTIONS FOR ONBOARD OR SPOT MARKET PRODUCTS WHILE AT SEA.

That this can happen several times during the trip at sea

HYPOTHETICALLY FOR THE MOST PART – IN POINT OF FACT AND IN THE MAJORITY OF SITUATIONS DUE TO FUNDING METHOD RESTRICTIONS – THE PROCESS OF RESALE CAN TRULY ONLY WORK SECURELY ONLY ONCE IT WOULD BE BEST TO ASSUME.

Please explain how these transactions happen with a purchaser and seller?
THIS IS VERY TOUGH TO ANSWER IN FULL – EXCEPT TO STATE THAT AS AN INTERMEDIARY YOU ARE SELLER AND PURCHASER

“PRODUCT PROVIDER” OWNS THE PRODUCT AND MAKES THE SALE TO YOU – THE PURCHASER – WHO THEN TURNS AROUND AND MAKES A RESALE TO THE END PURCHASER [THE ONE PURCHASING THE PRODUCT/USER OF THE PRODUCT/GETTING POSSESSION OF THE PRODUCT] AS SELLER – ALSO YOU.

YOU –THE PURCHASER – BUYS THIS CRUDE OIL FROM THE PRODUCT PROVIDER WITH THE MONEY [FUNDING METHOD] FROM THE END PURCHASER – MAKING THE RESALE TO SUCH AND RECORDING SOME EARNED REVENUE AT SAME TIME.

THE ABOVE SCENARIO WOULD MEAN A THOUSAND PAGES AND MONTHS TO TEACH THIS FOR YOU TO FULLY COMPREHEND THE ENTIRE TRANSACTION PROCESS AND ITS INTRICACIES – AN INDIVIDUALMUST TAKE THE TIME TO LEARN FROM FTN EXPORTING POLICIES – FYBR.

ALL THINGS PURCHASED AND SOLD ARE DONE PROPERLY WITH DOCUMENTATION OF TITLE/ PRESENTATION/DELIVERY

Who is the owner of the crude oil and at what stage is the ownership of the crude exchanged? My thoughts are that when the crude oil is loaded on board the tanker ship it is the property of the oil manufacturer.

THESE ARE THE RULES OF INCOTERMS THAT SAY IN PART THAT FOB/CFROR CIF DELIVERY PURCHASER HAS OWNERSHIP OF PRODUCT WHEN THE SHIPS OIL OUTCROPPING PASSES OVER THE SHIP RAILS AT THE HARBOUR WHERE THE PRODUCT WAS LOADED ABOARD.

SO WHAT YOU JUST HEARD WAS THE OBVIOUS ANSWER – PURCHASER HAS OWNERSHIP WHEN PRODUCT IS LOADED AT THE HARBOUR. PRODUCT PROVIDER IS AT LIBERTY TO TAKE PAYMENT PRIOR TO THE SHIP SLIPPING ITS MOORS AND LEAVING FOR THE NATION IT IS SUPPOSED TO TRAVEL TO.

This producer of the oil arranges to ship the crude via tanker. They load the crude oil onboard and the ship gets underway to a destination.

DURING A CIF TRANSACTION THE “PRODUCT PROVIDER” SCHEDULES THE TANKER SHIP – IN FOB TRANSACTION THE PURCHASER NEEDS TO GET A CHARTER AGREEMENT FOR HIS OWN SHIP [FOB/CIF INCOTERMS DELIVERY RULES]

The oil manufacturer then locates a purchaser for the crude oil.

A PURCHASER NEEDS TO BE GENUINE PRIOR TO ANY CRUDE OIL BEING TRANFERRED AS AN OFFER, AGREEMENT AND IMBURSEMENT ARE AN INITIAL REQUIREMENT – BEFORE THE LOADING PROCESS EVEN BEGINS AND THIS COULD TAKE QUITE A BIT OF TIME TO SETTLE AND ASCERTAIN THE DETAILS.

The purchaser then accepts all the costs of shipping and they are the new owner of the crude oil. If the new purchaser happens upon a different purchaser agrees to pay a heftier fee.

THIS CONSTITUTES A BREACH OF THE AGREEMENT AND IS NOT PERMITTED

They could be interested in making another deal for the crude immediately and close another new deal. This is how I envision the process but I await your explanation.

THIS IS NOT EVEN CLOSE – YOU MUST HAVE MANY MONTHS OF COURSE TRAINING BEFORE YOU UNDERSTAND THE FUNCTIONALITY AND TECHNIQUES INVOLVED. EXAMINE OUR URPIB RULES AND SOURCE OUT INCOTERMS DELIVERY RULES ON THE INTERNET AS WELL AS UCP 600 FINANCIAL INSTRUMENTS BANKING RULES – THESE CAN HELP OU OUT SOME.

I HOPE THIS HAS HELPED