Major discrepancies in International Oil TradingWe have been dealing with consulting and brokering for International Oil trading for quite some times. From our experiences, to close transaction in this trade are extremely difficult!
Take for example of recently, I have received a few buy enquiries on Mazut M100 and Russian D2. In all the enquiries, all the buyers are “very worry” and put in clauses and terms that they think will protect the buyers’ interest and reduce risks.
However, those clauses or terms that the buyers insisted to put into the contracts were "very worry" for my seller side too. As the terms seem to be one side favoring the buyer, putting the seller to bear unnecessary risks and certainly unfair for the seller.
Since I am on the seller side, my responses and opinions could be considered to the buyers as bais. Nevertheless, I still want to express and share my thoughts and let others who are more experienced and wiser than me to judge whether I written in this blog is indeed true in any sense.
Buyer has the right to state a clause or term that protect the interest of the buyer, but if the clause or term unfortunately put the seller at higher risk or probably incurs higher cost in selling, what would the seller do?
I could possibly think of a few possible scenarios as below.
Scenario A: Seller thinks that the Buyer is not serious and sincere, and therefore just walks out of the deal. I believe no seller stupid enough to engage in business transaction that caused him to lose money, right? (May be next times, I will share my interesting stories on how some sellers walk out of the deals nicely or angrily.)
Scenario B: Seller will counter proposed with a clause or term that the buyer may or may not accept. If it is not accept by the buyer, the buyer could either walk out of the deal, or counter propose another clause or term, or even most likely insist that the original term proposed by the buyer must be comply by the seller. (Look like "hard buying" in some sense, I think.)
For Scenario A, it is very straight forward case. It is no deal and end of story.
In Scenario B, it could develop into many possibilities. However, there is no assurance that the transaction will still progress successfully even both parties try to propose feasible solutions. As in most cases, the discrepancies are that either party could be lack of experiences and expertise in dealing International Oil trading, or only care of protecting the interest of themselves. Then no matter how much times or efforts both put into to work out the differences in closing the deal successfully, it will in vain.
I believe in doing business, there is no such things as one party will gain all the advantages and take much lesser risks compare to the other party. It must be fair and willing by both parties to have a successful business transaction. However, due to lack of related knowledge and experiences in either parties that will caused major difference/gap in negotiating or closing a business transaction. It is also probably too much bad experiences become a burden in making the negotiation successful.
Everyone talk about achieve Win-Win situation, or even All Win situation in negotiating a business transaction. Sometimes I believe it is easy to say than for one to achieve that, especially in international oil trading. If one has to look at this trade positively, that is the interesting and challenging part of this business, but it is also a waste of time and efforts for many people, as it doesn't achieve much except face with much frustration and disappointments at the end of the day.
Just like me, the middleman, brokers, agents, traders, consultants mandates or whatever those people want to call themselves in this trade that communicate between the buyers and sellers, and want to earn some or a lot of compensation in doing this business, it is not just about whether who you know or who know you, but rather how this people can bridge the gaps and minimize the differences between the buyer and seller to achieve success closing of business transaction in this trade.
Lastly, I would think another skill that we need to acquire in this trade is to know very early how big the difference or gap between both buyer and seller parties. If the difference is too big, I better not waste too much time and efforts, as the transaction will never complete successfully since one party just insist most of the terms in the transaction to favor themselves. In short, it takes two hands to clap, not one.
Have a nice day.