Education · For traders new to physical oil
How real physical oil trading actually works
And how to tell the difference between a real cargo deal and the LOI/ICPO/DLC broker scam ecosystem that has polluted the LinkedIn fuel broker market for 20+ years.
If you’ve ever signed a Letter of Intent, issued an ICPO, or been asked for a 2% performance bond against a non-operative DLC MT700—this article is for you.
TL;DR
Real physical oil cargoes move on Platts- or Argus-indexed pricing, against nominated vessel charter parties, with independent SGS or Saybolt surveyors measuring quality and quantity at loading. Payment is standard commercial banking—sight LC or wire. There are no “tabletop meetings,” no “dip and pay” procedures, no Virgin Fuel D2/D6, no ASWP destinations, and no 2% Performance Bonds against non-operative DLCs. If a procedure tells you otherwise, you’re looking at a scam template, not a trade.
How a real physical cargo moves
Here’s the actual lifecycle of a real cargo, from first conversation to final payment. Every step has a name, every name has a standard, and every standard has a third party enforcing it.
Price discovery
Both sides look at the same public benchmarks — Platts Dated Brent, Argus Dubai, ICE futures. A seller offers at “Platts Dated Brent + $1.20/bbl” or “Argus Sour Crude Index + $0.80/bbl.” No “TBD based on source refinery.”
Term sheet
A one-page term sheet with grade, volume, laycan, incoterm, price formula, and payment terms. Negotiable. No “non-negotiable procedure codes.” No LOI, no ICPO, no FCO.
Sales & Purchase Agreement (SPA)
Signed contract based on GT&Cs of one of the counterparties or a standard industry template (ASTM, BP GT&Cs, Shell GT&Cs). Typically 10-40 pages, with clauses for quality, quantity, laycan, demurrage, force majeure, jurisdiction.
Letter of Credit or open credit
For new counterparties, buyer’s bank issues a sight LC or 30/60/90-day LC through SWIFT MT700 in favour of the seller. Operative from day one. No “non-operative, conditional on 2% performance bond” structures.
Vessel nomination
Buyer (on FOB) or seller (on CIF) nominates a specific vessel by name, IMO number, flag, and ETA. Vessel must pass counterparty’s vetting (SIRE, CDI, age, P&I club). Real vessels have real Q88s that can be verified.
Loading & independent inspection
Vessel berths at the loading terminal. SGS, Saybolt, Intertek, or Inspectorate measures ullage, takes samples, confirms quality (API, sulfur, BS&W, pour point). Bill of Lading issued by the vessel master. Cargo is now legally the buyer’s (or still the seller’s, depending on incoterm).
Payment
Documents presented at buyer’s bank. Conforming documents = payment released by SWIFT MT103. No “dip and pay” at destination tanks. No escrow law firms in the USA/UK. No shared freight deposits between buyer and seller.
Discharge & final settlement
Vessel discharges at destination. Final quality/quantity measurement at discharge port. Price adjustment if there’s a quality deviation. Demurrage settled separately.
Scam template vs. real trade
If you’ve been in the LinkedIn fuel broker circle, you’ve seen these “procedures” dozens of times. Here’s how they compare to what real traders actually do.
Broker scam ecosystem
"Virgin Fuel D2" or "D6" — Russian/GOST grades that don't exist in international trade
Real physical trade
EN590 10ppm, ULSD, gasoil 0.1%S, jet A1 — standardized grades that real refineries produce
Broker scam ecosystem
Non-negotiable scripted procedures with codes like RK-70580-1 or KG-4
Real physical trade
Term sheets and SPAs negotiated clause by clause, often bespoke per counterparty
Broker scam ecosystem
"Non-operative DLC MT700, operative only upon 2% Performance Bond from seller's bank"
Real physical trade
Operative LC at sight or deferred (30/60/90 days). No circular activation mechanics.
Broker scam ecosystem
"Tabletop meetings" at the buyer's logistics terminal where seller shows paper POP
Real physical trade
Independent inspectors (SGS, Saybolt, Intertek) measure cargo on the vessel at loading
Broker scam ecosystem
"Dip and Pay" at the seller's tank farm before vessel loading
Real physical trade
Loading happens at an authorised terminal, under customs supervision, with Bill of Lading issued on completion
Broker scam ecosystem
ASWP — “Any Safe World Port” — as destination
Real physical trade
Specific discharge port named in the SPA (Fujairah, Rotterdam, Lomé, Mombasa)
Broker scam ecosystem
Volume claims like “50,000 to 500,000,000 MT” per cargo
Real physical trade
Standard cargo sizes: 35k MT product tanker, 80k MT Aframax, 140k MT Suezmax, 280k MT VLCC
Broker scam ecosystem
NCNDA/IMFPA chain with multiple intermediaries earning commission
Real physical trade
Buyer and seller transact directly, or through a single recognised brokerage (PVM, Spectron, GFI, Tullett)
Broker scam ecosystem
Price stated as "TBD based on procedure and source refinery"
Real physical trade
Price formula: "Platts Dated Brent + $2.15/bbl, mean of 5 quotes around the B/L date"
Broker scam ecosystem
"CIF Escrow" procedures requiring BOTH buyer and seller to deposit freight into a US/UK law firm
Real physical trade
Freight is a seller cost under CIF, recovered through the cargo price. Escrow is unusual and bilateral.
Why the scam ecosystem exists
Physical oil trading is opaque to outsiders. Cargoes are big, counterparties are private, pricing is arcane. For people wanting to break into the industry without institutional access, LinkedIn offers the appearance of deal flow—and the broker scam ecosystem offers a ready-made script that looks professional.
The “procedures” aren’t trade mechanics. They are a social structure that generates constant activity (LOIs sent, ICPOs issued, DLCs “in progress”) without ever producing a real cargo. Some participants are knowingly fraudulent. Most are good-faith people who genuinely believe this is how the industry works, because it’s all they’ve ever seen.
The cost isn’t only time. Some procedures escalate into advance-fee fraud—“legal fees,” “escrow deposits,” “tank lease payments” that vanish once paid. If you’ve ever felt that a deal was always one step away from closing but never quite got there, you weren’t the problem. The framework was.
How OilFlow keeps this off the platform
Rule-based scam pattern detection on every listing at submission — auto-rejects LOI/ICPO/DLC MT700 language, fake product grades (D2/D6), impossible volumes, and ASWP destinations
Known-scam entity blocklist with fuzzy name matching — entities matching confirmed scam patterns cannot create accounts, let alone listings
Claude Opus holistic assessment on any lead the rules flag — cited reasoning, audit trail, and recommendation persisted to the compliance log
Full sanctions screening (OFAC SDN, UN, EU, UK) integrated into the same verification pipeline — zero approvals when APIs are degraded
Verified end-counterparties only — OilFlow members are confirmed refineries, majors, and sovereigns, not chain intermediaries reading from scripts
Tired of chasing procedures that never close?
OilFlow Network is where verified buyers and verified sellers actually trade. No LOI-ICPO merry-go-round. Platts-indexed pricing. Real cargoes. Real Bills of Lading.
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