Crude trading runs on a small, specific vocabulary, most of it unfamiliar outside the industry. This is a working reference to the terms that appear most often in a deal, grouped by where they show up: the paperwork, the cargo itself, the ship, and the market. See the Process page for how these instruments fit together in sequence.
Deal & Documentation
- NCNDANon-Circumvention, Non-Disclosure Agreement
- Signed before sensitive information changes hands. Prevents any party from bypassing the intermediary who introduced them, or disclosing deal details outside the transaction.
- IMFPAIrrevocable Master Fee Protection Agreement
- Legally protects every intermediary's commission for the life of the deal, naming each party's fee and payment sequence up front.
- ICPOIrrevocable Corporate Purchase Order
- The buyer's binding statement of intent: confirms product, volume, target price, and delivery terms in response to a seller's offer.
- SCOSoft Corporate Offer
- The seller's preliminary offer, product, specification, volume, and indicative pricing, issued before either side commits resources.
- SPASale & Purchase Agreement
- The binding contract. Incoterms, pricing formula, payment instrument, lifting schedule, and inspection regime are all fixed here.
- Proof of ProductPOP
- Documentary evidence that the cargo a seller is offering genuinely exists and is available to lift, verified before a buyer commits funds.
- Proof of FundsPOF
- Evidence, often a bank comfort letter, that a buyer has the financial capacity to complete the purchase, cross-checked against the seller's proof of product.
- Bank Comfort LetterBCL
- A letter from a buyer's bank confirming funds or creditworthiness, used as informal, non-binding proof of funds.
- Escrow
- A neutral third-party account holding funds until both sides have met their contractual conditions, then releasing payment.
- Mandate
- Written authorization for an intermediary to represent a buyer or seller in negotiating and structuring a transaction.
Quality & Inspection
- API Gravity
- A scale measuring how light or heavy a crude oil is relative to water. Higher API° means a lighter crude that typically yields more high-value refined products.
- Sweet vs. Sour
- Classification by sulfur content. Sweet crude runs below roughly 0.5% sulfur and refines more easily; sour crude carries more and needs additional processing.
- Light / Medium / Heavy
- Classification by API gravity. Light crude flows more freely and commands a premium; heavy crude is denser and generally trades at a discount.
- Assay
- A full laboratory analysis of a crude's properties, gravity, sulfur, distillation yields, used to price it and match it to the right refinery.
- SGS / CIQ
- Independent inspection agencies (Société Générale de Surveillance; China Certification & Inspection Group) that verify cargo quality and quantity at loading and discharge.
Logistics & Shipping
- FOBFree On Board
- Incoterm where the seller's responsibility, and the cargo's risk, transfers to the buyer once loaded onto the vessel at the origin port.
- CIFCost, Insurance & Freight
- Incoterm where the seller covers cost, insurance, and freight through to the destination port before responsibility transfers.
- CFRCost & Freight
- Like CIF, but the buyer arranges its own insurance; the seller pays only for cost and freight to the destination port.
- LaycanLaydays / Canceling
- The agreed window of dates within which a vessel must arrive to load, missing it entitles the charterer to cancel the fixture.
- Demurrage
- A penalty fee owed to the vessel owner when loading or discharge runs longer than the laytime agreed in the charter party.
- Ullage
- The empty space left in a tank or vessel above the liquid, measured to calculate the exact cargo quantity loaded.
- Ship-to-Ship TransferSTS
- Moving cargo directly between two vessels at sea or anchorage, used when a destination can't accommodate the loading vessel.
Market & Pricing
- Benchmark Crude
- A widely-traded reference grade, Brent and WTI chief among them, that other crude streams are priced at a differential to.
- Differential
- The price gap between a specific crude grade and its benchmark, reflecting quality, freight, and regional supply and demand.
- Spot vs. Term
- A spot deal is a single, one-off cargo; a term contract commits both sides to regular deliveries over a set period, often monthly for a year.
- OPEC
- The Organization of the Petroleum Exporting Countries, a coalition of major producing nations that coordinates output policy and influences global supply.
- Barrelbbl
- The standard unit of measure for crude oil: 42 US gallons, roughly 159 liters.
- Refinery Yield
- The mix of products, gasoline, diesel, jet fuel, and more, a refinery produces from a barrel of crude, which varies with crude type and refinery configuration.
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