Every physical trade is quoted on an Incoterm that defines exactly where risk and cost pass from seller to buyer. The three you will meet most often in oil and petrochemical trading are FOB, CFR and CIF.
The three terms in one table
| Term | Seller delivers when… | Who books freight | Who insures |
|---|---|---|---|
| FOB (Free On Board) | Cargo is loaded on the vessel at the load port | Buyer | Buyer |
| CFR (Cost and Freight) | Cargo is loaded, but seller pays freight to destination | Seller | Buyer |
| CIF (Cost, Insurance and Freight) | As CFR, plus seller arranges marine insurance | Seller | Seller |
In all three, risk passes at the load port once the cargo is on board. The difference is who pays for, and controls, the voyage.
Choosing the right one
Choosing an Incoterm is about who is best placed to manage freight, insurance and port risk.
- A buyer with strong local logistics and its own chartering desk may prefer FOB and control the vessel.
- A buyer who wants a delivered price and less operational burden will prefer CFR or CIF.
- For truck deliveries inside the UAE, the equivalent conversation is about ex-terminal versus delivered to site, which is where our road-transport arm comes in.
Documentation keeps it clean
Clear Incoterms, backed by complete trade documentation and independent inspection, are what keep a physical transaction clean from origin to delivery. Make sure the term is written on the contract, the invoice and the bill of lading consistently, and that the quantity and quality basis (load-port or discharge-port figures) is agreed up front.
General market education only. Not investment, financial or trading advice.
