FOBPetroleum Trading

Trading on FOB Terms

FOB (Free On Board) is one of the two delivery structures most commonly used in petroleum trading — the other being CIF. Under FOB, our responsibility as seller ends once product is loaded onto the buyer's nominated vessel at the load port. From that point, the buyer owns the cargo, arranges its own freight and marine insurance, and controls the onward voyage.

This structure suits buyers who already have chartering relationships, an in-house shipping desk, or an appointed freight forwarder, and who want direct control over vessel selection, freight cost, and — because the cargo is theirs from the load port onward — the flexibility to redirect or resell it while it is still at sea.

We offer FOB loading of crude oil, EN590 diesel, Jet A1, gasoline, and bunker fuel from all four of our terminals — Rotterdam, Houston, Jurong, and Fujairah — with the same independent inspection and documentation standards applied to every cargo regardless of delivery term.

Choosing between FOB and CIF ultimately comes down to who is better placed to manage freight risk. A trading house with an active chartering desk, or a national oil company with a standing relationship with a shipping line, will often prefer FOB to capture freight savings and retain optionality over the cargo's final destination. A first-time importer, or a buyer without in-house logistics capability, more often prefers the simplicity of CIF. We supply both structures from the same terminal network, so the choice can be made on commercial grounds rather than operational constraint.

FOB TRADING AT A GLANCE

Without freight and insurance built into the price, FOB cargoes are typically cheaper at the point of purchase — buyers capture any freight savings from their own chartering relationships.

Buyers select their own vessel, shipping line, and route, which matters for traders with existing charter arrangements or specific vessel-class requirements.

Because the buyer arranges the voyage, cargo can be redirected to a different discharge port after loading — useful for traders selling cargoes on while afloat.

FOB contracts involve fewer moving parts on the seller's side (no freight or insurance arrangement), which can shorten the time from agreement to loading.

FOB cargoes are available from Rotterdam, Houston, Jurong, and Fujairah, giving buyers a choice of load port geography to suit their onward voyage.

FOB works best for buyers with their own shipping or chartering capability, or an appointed freight forwarder — a natural fit for trading houses, refineries, and national oil companies.

Buyer submits an Irrevocable Corporate Purchase Order or formal inquiry specifying product, volume, and preferred load port.

A Sales and Purchase Agreement is signed specifying FOB Incoterms 2020, load port, laycan window, price formula, and payment terms.

The buyer nominates a vessel and provides its particulars to the seller ahead of the agreed laycan (loading window).

Product is loaded at the terminal under independent SGS or Intertek supervision, with gauging and sampling before and after loading.

The Bill of Lading is issued on completion of loading; risk and title transfer to the buyer as product passes the vessel's rail.

The buyer's vessel departs under its own charter arrangements; freight, insurance, and the onward voyage are the buyer's responsibility from this point.

The governing contract specifying FOB Incoterms, load port, laycan, quantity tolerance, price formula, and payment terms.

Issued once the terminal and cargo are ready for the buyer's nominated vessel to commence loading.

The key title document under FOB — issued on completion of loading, confirming quantity and grade shipped and evidencing the buyer's ownership.

Issued by an independent inspector confirming the product loaded meets the contracted specification and volume.

Confirms the country of origin of the product, required for customs clearance at most discharge ports.

What does FOB mean in petroleum trading?

FOB (Free On Board) is an Incoterms 2020 delivery term under which the seller's responsibility ends once the product passes the vessel's rail at the load port. The buyer arranges and pays for the vessel, freight, and marine insurance from that point onward, and takes on the risk of loss or damage during the sea voyage.

What is the difference between FOB and CIF?

Under FOB, the buyer arranges and pays for freight and insurance, and risk transfers at the load port. Under CIF (Cost, Insurance & Freight), the seller arranges and pays for freight and minimum insurance to the named discharge port, though risk still transfers to the buyer at the load port under both terms. In practice, FOB gives the buyer more control over logistics; CIF is simpler for buyers without their own chartering capability. TOO Crude Oil offers both — see our CIF petroleum supply page for the alternative structure.

Who nominates the vessel under an FOB contract?

The buyer nominates the vessel, providing particulars (name, IMO number, flag, deadweight, and ETA) to the seller within the timeframe specified in the Sales and Purchase Agreement, so the terminal can plan berth allocation and confirm loading readiness.

When exactly does risk transfer under FOB?

Risk transfers from seller to buyer once the product passes the vessel's permanent rail at the load port — in practice, once loading is complete and the Bill of Lading is issued. Before that point, any loss or damage during loading remains the seller's responsibility.

Can I buy FOB without operating my own shipping department?

Yes. Many FOB buyers use an appointed freight forwarder or ship broker to handle vessel chartering and freight arrangements rather than managing it in-house. We work directly with your nominated broker or forwarder to coordinate the vessel nomination and loading schedule.