The oil trading procedure: from ICPO to delivery
Every legitimate bulk petroleum transaction follows a documented sequence that protects both sides through their banks. This guide explains each step — what the document is, who issues it, and what it must contain.
Step 1 — Buyer issues the ICPO
The Irrevocable Corporate Purchase Order opens the transaction. It is issued on the buyer's letterhead and states the product and grade, monthly quantity, contract length, delivery basis (CIF or FOB) and destination, together with the buyer's company registration details and banking references. "Irrevocable" signals that the buyer is committing to transact on the stated terms if the seller can meet them — it is what separates a serious enquiry from a price-fishing email. A complete ICPO is also the fastest route to a quote: it lets the trading desk respond with a firm structure instead of questions.
Step 2 — Seller issues the SCO
The Soft Corporate Offer is the seller's response: product specification, available quantity, gross price basis, delivery terms and the transaction procedure. "Soft" means indicative — it is not yet a contractual commitment, but it tells the buyer exactly what a firm deal would look like. At PetroGlobal the SCO is issued within 24 hours of a complete ICPO on business days.
Step 3 — FCO is issued and countersigned
When the buyer accepts the SCO structure, the seller issues the Full Corporate Offer — the firm version, including final gross pricing, any discount and commission structure, the governing product specification (with assay for crude), inspection and delivery mechanics. The buyer countersigns it, which fixes the commercial terms that will be written into the contract.
Step 4 — SPA is signed and lodged with both banks
The Sales & Purchase Agreement converts the FCO's terms into the binding contract: quantities and laycans, price and payment instrument, inspection regime, documents to be presented, and remedies. Both parties sign, and each lodges the contract with its bank — from this point the transaction proceeds bank-to-bank, which is what makes the procedure verifiable.
Step 5 — POP against the payment instrument
Proof of Product — tank receipts, quality certificates, allocation title or equivalent — is presented through the seller's bank against the buyer's payment instrument: a DLC (Documentary Letter of Credit), SBLC (Standby Letter of Credit) or MT103 wire, as agreed in the SPA. The exchange is simultaneous and bank-verified, so neither side is exposed: the buyer never pays against paper it cannot verify, and the seller never releases title without a live instrument.
Step 6 — Loading, inspection and delivery
The cargo loads at the terminal under SGS or CIQ quantity-and-quality inspection at the seller's expense. The inspection certificate joins the document set presented through the banks. Delivery completes either FOB — title and risk pass at the loading port, buyer's vessel — or CIF — the seller ships to the buyer's discharge port with freight and insurance included. Choosing between them is its own decision; see CIF vs FOB in oil trading.
Why the sequence matters
Each step exists to remove a specific risk: the ICPO screens buyers, the SCO/FCO pair prevents terms from drifting, the SPA makes everything enforceable, and the bank-to-bank POP-against-instrument exchange means funds and title move simultaneously or not at all. Be wary of any counterparty who proposes skipping steps, moving the exchange off banking channels, or paying "activation fees" outside the instrument — deviations from the documented sequence are where fraud lives in this industry.
Frequently asked questions
What is an ICPO in oil trading?
An Irrevocable Corporate Purchase Order — the buyer's formal, binding statement of intent to purchase, on company letterhead, stating product, quantity, delivery terms and target price, with company profile and banking references attached.
What is the difference between an SCO and an FCO?
An SCO (Soft Corporate Offer) is the seller's non-binding indication of product, quantity, price and terms. An FCO (Full Corporate Offer) is the firm, complete offer issued after the buyer accepts the SCO — once countersigned, it fixes the commercial terms for the contract.
What is POP (Proof of Product)?
Documentary evidence that the seller holds the goods — tank receipts, an SGS quality certificate, or allocation title — presented bank-to-bank against the buyer's payment instrument, never informally by email.
Which payment instruments are used?
A Documentary Letter of Credit (DLC), a Standby Letter of Credit (SBLC), or a direct MT103 wire transfer, as agreed in the SPA.
How long does the procedure take?
With responsive parties, ICPO to signed SPA typically takes one to three weeks; first delivery follows per the agreed laycan, commonly within two to six weeks of instrument activation depending on product and destination.
Related guides & products
Ready to issue an ICPO?
Send it through the quotation form — SCO within 24 hours.