Overview
The enquiry should help the desk answer whether the cargo is worth moving, which transport proposition fits it and what uncertainty remains before commitment. It should also distinguish a firm transaction from an exploratory arbitrage, so bidders do not price an unbounded set of possible trades as though it were one movement.
Key takeaways
- Define the actual crude and receiving requirement before comparing freight.
- Separate purchase value, sales value and transport expenditure.
- Use compatible quantity and currency bases throughout the model.
- Price a firm movement before requesting destination or parcel alternatives.
- Show the timing and quality conditions that can change the margin.
- Keep current call information explicit rather than inferring it from a known trade pattern.
Define the Atlantic movement precisely
Atlantic is a broad commercial description. The enquiry needs named loading and receiving propositions, or clearly bounded alternatives, so that the transport service can be understood. A regional label alone does not specify cargo availability, terminal requirements or the buyer's delivery opportunity.
Equinor describes Mongstad as including a crude oil terminal, with crude exported to customers in North America, Europe and Asia. Equinor Mongstad
That example illustrates why the origin name does not determine a single destination or commercial structure. The desk must still define the actual proposed movement. A published facility description does not confirm a particular cargo allocation, vessel acceptance or future loading opportunity.
For a current transaction, the authorised loading and receiving proposition for this enquiry is not provided; obtain current verified information. The current cargo availability reference is not provided; obtain current verified information. These are call-specific inputs; where confirmation is unavailable, the uncertainty should remain visible rather than being replaced with a familiar historical pattern.
State whether the cargo is already purchased, subject to a sales negotiation or being investigated as a possible trade. The stage affects what the desk can commit and which alternatives are real. A transport enquiry for a hypothetical purchase should not be described as a firm cargo merely to obtain a more decisive response.
Describe the crude as an actual parcel
Give the product identity and the cargo information available for the relevant assessment. A grade name can organise the enquiry, but the receiving party may need the actual parcel particulars to assess its commercial fit. Avoid assuming that a familiar name resolves every quality or compatibility question.
Separate the quality-related trading assumption from technical acceptance. A buyer may value a crude at a particular differential while the proposed vessel or receiving arrangement still requires review. The transport desk should identify those dependencies without offering its own technical conclusion.
Where the purchase or sale value depends on an adjustment, explain which information determines that adjustment and whether it is provisional. A headline differential can conceal a material outstanding condition. The enquiry does not need to disclose every confidential trading detail to every bidder, but the internal decision model must retain the factors that can change the margin.
If the seller proposes a substitute parcel, treat it as a specific alternative. A lower purchase basis may be attractive, yet the receiving value or transport requirements can also change. Compare the complete alternative rather than carrying the original sales assumption across without review.
Align quantity and price units
Crude transactions and transport offers may use different expressions. Preserve each original basis, then obtain an appropriate authorised conversion where a common calculation requires it. Do not invent a standard conversion from the product name or vessel category.
The internal model should state which quantity controls purchase cost, which controls sales value and which controls freight. Where those quantities differ for a legitimate commercial reason, show the relationship. Where the difference is unexplained, identify the missing information before reporting a final margin.
A fixed transport amount creates quantity sensitivity even if its headline price does not change. A smaller parcel spreads the same commitment across fewer units. A variable transport expression behaves differently. Ask bidders how the proposed quantity range affects the amount rather than assuming every price scales proportionately.
Currency treatment needs the same discipline. Compare amounts in a stated reporting currency using a defined basis for the analysis. An internal conversion should not imply that the underlying payment obligation has changed currency. If exchange exposure is relevant, show it separately from the physical transport comparison and use current appropriate information for an actual transaction.
Build the delivered contribution in layers
Begin with sales value less purchase cost on a compatible basis. Then deduct the transport and other incremental expenses borne by the decision-maker. State what is excluded, such as financing, tax or a quality adjustment, rather than hiding those omissions behind the label net margin.
Avoid adding an internal voyage fuel model on top of an inclusive freight quotation. The model and the quotation may describe overlapping economic costs from different perspectives. Use one coherent boundary for the cargo decision and keep any vessel employment analysis separate.
The resulting contribution is a commercial comparison, not necessarily accounting profit. It can help choose between destinations or cargo alternatives while excluding costs that are common to both. If management needs the total transaction result, provide that broader view as well and explain the difference.
For an exploratory trade, show the minimum additional sales value required to cover the transport proposition. This creates a useful negotiation boundary. It does not establish that a buyer will pay that value or that the receiving opportunity is available.
Work through a simplified destination comparison
The following fictional calculation uses one common commercial barrel basis solely to illustrate the decision. It assumes identical cargo quantity and purchase cost across the destinations and excludes financing, tax, quality adjustments and unlisted charges. None of the figures represents a current crude price or Atlantic freight rate.
ILLUSTRATIVE: A fictional cargo contains 600,000 commercial barrels purchased at $70 per barrel, for a purchase amount of $42,000,000. Destination A offers $74 per barrel, producing sales value of $44,400,000. Freight is $1,500,000 and other included expenses are $300,000. The simplified contribution is $600,000: sales less purchase, freight and those expenses.
Destination B offers $74.50 per barrel, producing sales value of $44,700,000. Its freight is $1,900,000 and other included expenses are $350,000. The simplified contribution is $450,000. Despite the higher sales price, B contributes $150,000 less than A under these assumptions.
B adds $450,000 of transport and included expenses relative to A. Dividing that difference by 600,000 barrels gives $0.75 per barrel. B therefore needs a sales price of $74.75 per barrel to match A's $600,000 contribution, assuming every other stated input remains unchanged.
| Fictional item | Destination A | Destination B |
|---|---|---|
| Purchase amount | $42,000,000 | $42,000,000 |
| Sales amount | $44,400,000 | $44,700,000 |
| Freight | $1,500,000 | $1,900,000 |
| Other included expenses | $300,000 | $350,000 |
| Simplified contribution | $600,000 | $450,000 |
The example shows why a higher selling price is not enough to select a destination. It also supplies a precise question for negotiation: can B provide enough additional value, or can its transport proposition improve sufficiently, to close the contribution gap?
The crossover is conditional on the model's boundary. If B changes payment timing, quality treatment or another material expense, include that difference before using the figure. A clean calculation can still support a poor decision when an important commercial component is missing.
Design the transport enquiry around the trading choice
Request a firm base movement with named quantity, loading proposition, destination and timing. Then ask for the specific alternative that could improve the trade. Avoid circulating a long menu of destinations with no indication of which choices are commercially realistic.
Where flexibility has value, request its price and decision deadline separately. A destination option that expires before the buyer can commit may not serve the transaction. A more expensive option with a usable deadline might be preferable, depending on the additional sales opportunity and the consequences of non-exercise.
Explain how quotations should treat a change in quantity. Ask whether the stated amount remains fixed, scales with quantity or needs a fresh proposal. This prevents a desk from comparing the largest hypothetical parcel under one offer with the expected parcel under another.
The enquiry can also ask bidders to identify exclusions that are material to the comparison. A low freight amount with substantial unpriced destination expenditure may not support the expected contribution. Preserve those exclusions in the recommendation instead of presenting the headline amount as the whole delivered cost.
Link the loading period to the buyer's need
The relevant time objective is the receiving milestone that supports the sale. Define whether the buyer needs arrival, commencement of service or completed delivery by a particular point. Work back through the proposed sequence using estimates supplied for the actual movement.
A late loading opportunity can have more than a proportional effect if it causes the cargo to miss a receiving window. Conversely, earlier arrival may provide little immediate benefit if the receiver cannot accept the cargo sooner. The enquiry should expose that relationship rather than requesting the shortest passage in isolation.
Use a base sequence and a defined adverse scenario where timing can change the destination comparison. State the effect on the commercial contribution or the remaining choices. Do not invent a probability merely to turn incomplete information into a single expected margin.
Keep internal time costs distinct from contractual charges. An economic allowance can inform the trade decision without proving that another party owes that amount. Check the current text before making statements about payment responsibility or remedies.
Screen the complete proposition before commitment
| Decision gate | What must be clear | Commercial consequence if unresolved |
|---|---|---|
| Cargo identity | Actual parcel information and relevant receiving assessment | Sales value or acceptance may remain conditional |
| Loading opportunity | Authorised facility and availability basis | Transport timing may not be achievable |
| Quantity basis | Purchase, sales and freight calculation inputs | Contribution may not be reproducible |
| Receiving proposition | Buyer, milestone and opportunity | Higher sales value may not be usable |
| Transport scope | Included services, options and material exclusions | Delivered cost may be understated |
| Remaining uncertainty | Specific condition and decision deadline | Management cannot distinguish firm value from contingent value |
The gate is not a demand that every uncertainty disappear. It is a way to identify which uncertainty management is accepting and whether the remaining proposition still fits the business objective. A limited conditional commitment can be appropriate when its scope and consequences are understood.
The latest authorised receiving assessment reference is not provided; obtain current verified information. Its scope should match the actual parcel and proposed movement. A general description of the buyer or terminal should not fill this slot as though it were a call-specific conclusion.
Fictional case: a discount that did not survive delivery
A fictional crude trader identifies an attractively priced Atlantic parcel and begins transport enquiries before confirming the receiving buyer. The initial internal note describes the purchase discount as a trading opportunity and uses a broad average freight allowance.
As the enquiry develops, the likely buyer requires a different delivery proposition from the one assumed. The transport offers now include a higher freight amount and additional receiving expenses. The actual parcel information also leaves a sales-value adjustment unresolved.
The desk rebuilds the contribution from the compatible purchase, sales and transport bases. It requests a firm destination quotation and a separately priced alternative buyer. The purchase remains potentially attractive, but only under conditions that are now explicit. Management can negotiate the cargo, change the receiving proposition or decline the trade without relying on a discount that never represented delivered value.
Common mistakes
A purchase discount is not a delivered margin. A higher sales price is not necessarily a better destination. Another mistake is mixing barrel, mass and volume expressions without an authorised basis, or adding a vessel-cost model to an inclusive freight quotation. Avoid using a published terminal description as current call confirmation. Finally, keep unresolved quality, timing and receiving conditions visible instead of burying them in a precise-looking contribution figure.
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Educational information only; not legal, financial or trading advice. Contract wording and applicable rules control. Verify current requirements and obtain qualified advice before acting.
Frequently asked questions
Should the enquiry begin with a vessel category?
Begin with the actual cargo and delivery proposition. A vessel category can help organise the search, but it should not replace quantity, facility and receiving requirements.
Is the highest sales price the best destination?
Only if its additional value exceeds the additional transport and other relevant expenses on a compatible basis. Compare the complete contribution.
Can an internal margin model use converted quantities?
Yes, when the conversion has an appropriate authorised basis and the original commercial expressions remain traceable. Do not invent a generic factor.
What if the receiving buyer is not yet firm?
Treat the enquiry as exploratory or request clearly bounded destination alternatives. Do not present an unresolved sale as a confirmed delivery proposition.
Does a positive simplified contribution prove the trade is profitable?
No. It reflects the stated inputs and exclusions. Include other material costs and conditions before treating it as the complete transaction result.