CIF vs FOB in oil & fuel trading
The two delivery bases you'll see on every bulk fuel offer decide who charters the ship, who insures the cargo, and where risk changes hands. Here's how they differ and how to choose.
What CIF means
Cost, Insurance and Freight. The seller charters the vessel, pays the freight to the named discharge port, and provides marine cargo insurance for the voyage. The buyer's obligations start at its own port: berth availability, import clearance and discharge. Under Incoterms, risk technically passes when the cargo is loaded on board at origin — but because the seller has arranged carriage and insurance, the buyer's practical exposure on the voyage is covered by the policy travelling with the documents.
What FOB means
Free On Board. The seller's job is done when the product is loaded over the rail of the vessel the buyer nominated at the loading terminal. From that moment, freight, insurance, demurrage exposure and voyage risk belong to the buyer. FOB buyers are typically traders and majors with chartering desks who can beat the seller's freight economics or want scheduling control.
Side by side
| Dimension | CIF | FOB |
|---|---|---|
| Vessel chartering | Seller | Buyer |
| Freight cost | In the price | Buyer pays separately |
| Marine insurance | Seller provides | Buyer arranges |
| Risk on the voyage | Covered by seller's policy | Buyer's |
| Price per unit | Higher (includes shipping) | Lower |
| Best for | End-buyers, first transactions | Buyers with chartering capability |
Concretely, on our current indications the spread looks like this: Diesel D2 at $410 CIF vs $400 FOB per MT, or Jet A1 at $101 CIF vs $99 FOB per barrel — the difference is the shipping leg.
How the choice affects the transaction
- Documents: CIF adds the insurance certificate and freight documentation to the set presented through the banks; FOB sets close at the loading port with the mate's receipt and bill of lading.
- Laycan coordination: under FOB your nominated vessel must meet the loading window — missed laycans cost demurrage. Under CIF that scheduling burden is the seller's.
- Payment instrument: either basis works with a DLC, SBLC or MT103; the instrument simply references the matching document set, as fixed in the SPA (see the full procedure guide).
- ASWP: "Any Safe World Port" in a CIF offer means the seller will quote delivery to any port that can safely berth the nominated vessel size — draft and berth limits still apply.
Frequently asked questions
What does CIF mean in oil trading?
Cost, Insurance and Freight: the seller arranges and pays for the vessel and marine insurance to the named discharge port. The buyer receives the cargo at its own port; risk formally transfers when the goods are loaded on board at origin.
What does FOB mean in oil trading?
Free On Board: the seller delivers the product on board the buyer's nominated vessel at the loading port. From that point the buyer pays freight and insurance and carries the voyage risk.
Why is the CIF price higher than the FOB price?
The CIF price includes the seller's freight and insurance cost to the destination. The gap between CIF and FOB reflects the shipping leg the seller is covering.
Which is better for a first-time buyer?
CIF is usually simpler: the seller handles chartering, insurance and scheduling. FOB suits buyers with their own chartering capability who want control of the freight cost.
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