Intermediaries in Petroleum Trading: When to Use Them (and When to Avoid)

You're sourcing 10,000 metric tons of diesel. One supplier quotes $510 per MT through their broker. Another claims "direct from refinery" at $500 per MT. The choice seems obvious – save $100,000 by going direct, right?

Maybe. But what if the "direct" seller is actually four layers removed from any real product, while the broker has legitimate relationships and can actually deliver? What if you spend 60 hours navigating a complex first transaction yourself when a professional intermediary could have handled it for $10 per MT?

The intermediary versus direct question isn't as simple as "cheaper is better." This guide explains when intermediaries add real value, when they're unnecessary overhead, and how to tell the difference.

What Intermediaries Actually Are

In petroleum trading, intermediaries include brokers who connect buyers with sellers, agents representing one party in transactions, mandates authorized to act on behalf of product owners, trading companies that buy and resell, and facilitators who coordinate complex deals. They all serve the same basic function: connecting buyers with product sources and facilitating transactions.

They earn commission for this service, typically $5-15 per metric ton. On a 10,000 MT purchase, that's $50,000-$150,000 in commission costs. Whether that's money well spent or wasted overhead depends entirely on what value they actually provide.

The Case for Using Intermediaries

Professional intermediaries provide market access you might not have on your own. They have established relationships with refineries, major distributors, and reliable suppliers globally. They can connect you with product sources you'd never find through Google searches or LinkedIn cold messages.

Experienced intermediaries bring expertise that prevents expensive mistakes. They navigate complex procedures without confusion, understand exactly what documentation is needed and when, know current market rates so you can tell if pricing is competitive, and spot red flags and scams that inexperienced buyers miss. For someone making their first petroleum purchase, this guidance alone can be worth far more than the commission cost.

Good intermediaries handle complexity that would otherwise consume your time and attention. They manage logistics coordination between multiple parties, handle documentation requirements and submissions, coordinate timing and communication between everyone involved, and troubleshoot issues when they arise. This frees you to focus on your actual business instead of becoming a part-time petroleum logistics coordinator.

There's also a risk reduction element. Established intermediaries have reputations to protect, which means they want deals to succeed. They can provide references from past transactions you can verify. And if issues arise, you have some recourse through them rather than being completely on your own with a foreign seller you've never met.

The time savings can be substantial. Instead of spending weeks searching for suppliers, vetting them, learning procedures, and coordinating everything yourself, you let someone who does this professionally handle it. For busy business owners, that time is often worth more than the commission cost.

And sometimes, surprisingly, intermediaries get better terms than you could negotiate directly. Their established relationships might yield better pricing, they might aggregate volume across multiple buyers to get preferred rates, and major suppliers sometimes offer better terms to intermediaries they've worked with repeatedly than to unknown direct buyers.

The Case Against Intermediaries

The most obvious downside is added cost. That $5-15 per MT commission means $50,000-$150,000 on a 10,000 MT purchase. It's an additional expense that directly impacts your margins and total cost.

Communication layers slow things down sometimes. Messages and questions pass through the intermediary rather than going directly between you and the supplier, which can create delays. There's also potential for miscommunication when playing telephone through a third party.

You have less control over some aspects of the deal. You can't always negotiate every term directly. You're dependent on the intermediary's relationships and capabilities. And there can be less transparency about exactly what's happening at each stage.

Intermediary quality varies enormously. Some are true professionals who earn every penny of their commission by providing expert service, market knowledge, and smooth transaction facilitation. Others are just bodies in the middle adding no real value beyond forwarding emails and collecting commission. Until you've worked with someone, it's hard to know which category they fall into.

The multiple layers problem is real. Sometimes you're working with an intermediary who's working through another intermediary, who might be working through yet another layer. Each layer adds cost and complexity while reducing transparency. You might end up paying $15/MT in stacked commissions to multiple people between you and the actual product.

When Intermediaries Make Sense

If you're making your first petroleum purchase, using a professional intermediary is usually smart. You don't know the market, procedures confuse you, documentation requirements are unclear, and the risk of expensive mistakes is high. Paying $10/MT for expert guidance through the process is cheaper than the mistakes you'd likely make going alone.

Buying from unfamiliar markets where you lack local knowledge also justifies using intermediaries. If you're purchasing from a new region or country, don't understand local regulations and customs, need cultural or language expertise, or require guidance on regional business practices, an intermediary with local knowledge is valuable.

Complex transactions with large volumes, complicated terms, international complications, multiple parties, or unusual requirements benefit from experienced facilitators who've handled similar deals before. They know how to structure things properly and avoid pitfalls.

If you simply don't have time to dedicate weeks to sourcing, vetting suppliers, learning procedures, and coordinating everything yourself, intermediaries make practical sense. Your time might be more profitably spent on your core business, with the efficiency of using professionals worth the commission cost.

And established intermediaries with proven track records, verifiable references, and actual accountability provide risk reduction that's worth something. It's not a guarantee, but it's better than navigating unknown waters completely alone.

When to Go Direct

If you have established relationships with suppliers from previous purchases, built trust over multiple successful transactions, and know their capabilities and reliability, you don't need intermediation. The value an intermediary would provide is minimal since you've already done the hard work of finding and vetting good suppliers.

High-volume regular buyers purchasing 50,000+ MT monthly should seriously consider developing direct relationships. The commission savings become significant at that scale – $500,000-$750,000 per month at $10/MT commission. That's worth the effort of building your own supplier relationships and internal expertise.

If you have industry experience yourself, understand petroleum trading procedures and documentation, can handle complexity without guidance, and know how to spot problems and red flags, you don't need someone else doing this for you. Pay for expertise you lack, not expertise you already have.

Local or straightforward transactions where you're buying from nearby suppliers with simple terms and limited complexity often don't justify intermediary costs. The simpler the deal, the less value intermediation provides.

And some suppliers actively prefer direct buyer relationships, especially for large regular purchasers. They'll often offer better terms to direct buyers they can build long-term relationships with compared to spot deals through brokers.

The Reality of "Direct from Refinery"

Here's an uncomfortable truth most buyers learn eventually: even offers claiming "direct from refinery" usually involve 2-3 intermediaries between the refinery and you. Refineries don't want to handle thousands of small buyers with one-off purchases. They have exclusive distribution agreements with major trading companies who handle wholesale quantities. Those trading companies work with regional distributors. And those distributors might use brokers to find end buyers.

This distribution network exists because it's efficient. Intermediaries aggregate demand from multiple buyers, handle logistics at scale, manage documentation and compliance, and assume credit risk. The system works this way for good reasons.

And that's okay. The presence of intermediaries doesn't automatically mean you're getting a bad deal. What matters is whether the total price is competitive, the service is professional and efficient, product is legitimate and verifiable, and the transaction succeeds smoothly. An intermediary adding real value while charging reasonable commission is fine. Multiple layers of intermediaries each taking a cut while adding no value is a problem.

Evaluating Intermediary Quality

Good intermediaries are transparent about their commission structure and will tell you upfront what they charge and who pays it. They provide references from past deals you can actually verify by contacting those buyers or sellers. They clearly know the process and procedures, answering questions with specific knowledge rather than vague generalities. They're responsive and professional in communications, meeting deadlines and following up consistently.

Importantly, good intermediaries are willing to support product verification rather than trying to rush past it or block your independent verification. They don't ask for upfront fees before delivering value. And their commission is reasonable – in that $5-15/MT range that's become industry standard.

Red flag intermediaries won't disclose their commission structure clearly, get evasive when you ask about fees, or try to hide commissions. They have no references or track record they can document. They request upfront fees for "registration," "compliance," or other vague purposes. They charge excessive commission like $30+/MT which suggests either inexperience or greed. They're vague about their actual role and what they're doing to earn commission.

Watch out for intermediaries who reveal they're working through multiple layers of other intermediaries – you're paying commissions to all of them. And intermediaries who get defensive when questioned about their value, role, or fees are usually hiding something.

The Real Cost Comparison

Consider a realistic comparison. Using an intermediary, you might pay $500/MT for product plus $10/MT commission, totaling $510/MT. Your time investment is minimal – maybe 10 hours reviewing documentation and communications. Your risk is reduced by the intermediary's expertise. Total cost is $510/MT delivered with professional support.

Going direct, you might pay $490-500/MT (you might save a bit, you might not – "direct" sellers still have margins). Your time investment is 40+ hours of searching, vetting, learning procedures, and coordinating. Your risk of mistakes is higher without expert guidance. And costly errors are possible. Your total is maybe $490-500/MT plus substantial time and elevated risk.

Is $10/MT worth professional guidance, time savings, and risk reduction? For many buyers, especially on first purchases or complex deals, absolutely yes. For experienced high-volume buyers doing simple repeat transactions, maybe not.

Working Effectively with Intermediaries

If you decide to use an intermediary, clarify commission upfront before proceeding. Ask directly: "What's your commission and who pays it?" Get a clear answer in writing.

Verify their claims by asking for references and actually calling those references. Check their track record with other buyers. Look for evidence they've successfully closed deals similar to yours.

Stay involved in the process rather than handing everything over blindly. Verify product yourself regardless of what the intermediary says. Review all contracts and documentation personally. Understand what's happening at each stage.

Make sure you understand their specific role. Are they just making an introduction and then stepping back? Are they facilitating the entire transaction? Are they handling logistics? Know exactly what you're paying for.

And protect yourself by following all normal verification procedures. Don't pay based solely on the intermediary's word that product is legitimate. Verify SGS reports, call terminals to confirm TSRs, conduct dip tests when appropriate. The intermediary should support this verification, not try to bypass it.

The Hybrid Approach Often Works Best

Consider this progression: for your first purchase, use an established intermediary for guidance and support. You'll pay commission but you'll learn the process properly. For your second purchase, use the same intermediary but get more involved yourself to understand procedures better. By your third purchase, you might go direct if you've built direct supplier relationships and understand the process.

Or use a hybrid approach based on transaction type: use intermediaries for complex or international deals where their expertise adds clear value, but go direct for simple or local purchases where complexity is minimal.

The goal isn't ideological purity about "always direct" or "always through intermediaries." The goal is successful transactions at competitive total costs.

Bottom Line

The key question isn't "intermediary or direct?" The real question is "am I getting competitive total price and professional service that delivers what I need?"

A $510/MT offer through a professional intermediary who ensures smooth delivery beats a $500/MT "direct" offer from a questionable seller who might disappear with your money. Focus on total value, not just avoiding commissions.

Intermediaries provide clear value when you're new to petroleum trading, the transaction is complex or international, you lack time or expertise to handle everything yourself, they have established relationships you don't, and their commission is reasonable at $5-15/MT.

Go direct when you have experience and established supplier relationships, high volume makes commission savings significant enough to justify the effort, transactions are straightforward and don't require expert facilitation, and you have the time and expertise to handle everything properly.

Whether intermediaries are involved matters less than competitive total pricing, verifiable product, professional process execution, and successful delivery. Those outcomes are what actually matter to your business.

Take Action

Submit an RFQ on CommoditiesHub and receive transparent quotes with clear pricing structures. Whether suppliers are direct sources or professional intermediaries with proven track records, you'll see exactly what you're paying for and can make informed decisions based on total value, not just theoretical preferences about supply chain structure.