Marketing

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Like other sectors of the oil and gas business, the marketing and distribution of petroleum products takes place on a vast, global scale. Every day, hundreds of millions of companies and individuals buy these products at wholesale or directly from retail outlets that number in the hundreds of thousands worldwide. If we include indirect users of petroleum products, the number of consumers runs into the billions.

Refined product markets are different from crude oil markets. The scale is much smaller: a typical crude oil transaction involves 500,000 or even one million barrels of oil, while a typical refined product sale may involve only 5,000 to 10,000 bbls. Product quality is more stringent as well – crude oil, by nature, has a wide variation in quality, while refined products must meet stringent specifications or else be considered off-spec and a breach of contract or a regulator violation.

Finally, there are many opportunities for arbitrage in the products market, because price differentials between grades of refined products are constantly changing at a given location or between locations many miles apart. This offers traders the opportunity to blend grades at one location or move cargoes around the world to achieve better prices or margins.

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