Trial Shipment or Full Contract? How to Start Your Petroleum Purchasing Relationship
You've found a petroleum supplier who looks legitimate. Their offer seems reasonable. Now comes the question: Should you start with a small trial shipment or commit to a full contract right away? The seller is pushing for a contract – better pricing, guaranteed supply, long-term partnership. But you're new to this market and wondering if that's smart.
This decision determines your risk exposure, pricing, and flexibility. Make the wrong choice and you're either overpaying significantly or locked into a bad relationship worth millions. Here's how to decide strategically.
What is a Trial Shipment?
A trial shipment is a smaller initial order – typically 5,000-20,000 MT – designed to test the supplier before committing to larger volumes. It's a one-time or short-term commitment that gives you the opportunity to verify supplier reliability, product quality, and delivery performance. If successful, you have the option to continue with larger orders or a contract. The tradeoff: trial shipments usually carry a slightly higher per-unit price.
Think of it as test-driving a car before buying.
What is a Full Contract?
A full contract commits you to larger volumes over time – typically 50,000-500,000+ MT total with multiple shipments like monthly deliveries for 6-12 months. It's a long-term commitment with better per-unit pricing but more complex terms and conditions covering everything from force majeure to dispute resolution.
Think of it as buying the car outright with a multi-year service contract included.
Advantages of Trial Shipment
Lower Risk
Your financial exposure is limited to one shipment. A $500K trial is vastly different from a $5M contract commitment. If something goes wrong – the supplier disappears, product is substandard, documentation is problematic – you lose far less. You can walk away without being locked into ongoing obligations.
Test Supplier Reliability
A trial lets you verify critical questions before committing millions: Does the product actually exist or is this a scam? Does the supplier deliver on time or do they constantly delay? Is quality as promised or will you get off-spec product? Is documentation proper or will you face customs issues? Is communication responsive or do they ghost you?
One successful trial reveals more than months of email exchanges and document reviews.
Build Trust and Learn the Process
Both parties prove themselves through a trial. You demonstrate you're a legitimate buyer with real funds. The supplier demonstrates they have real product and professional operations. This reduces uncertainty and builds confidence for larger deals.
For first-time buyers, a trial is petroleum trading education you can't get any other way. You learn the procedures, documentation requirements, inspection processes, and payment mechanics. You identify potential issues on a small scale before risking larger amounts. You gain practical experience that makes future transactions smoother.
Flexibility
Trials keep your options open. If the supplier disappoints, you try a different one. If product specifications need adjustment, you can modify for the next order. If you discover a better supplier or better pricing elsewhere, you're not locked in. This flexibility is valuable when you're still learning the market.
Disadvantages of Trial Shipment
Higher Price
Trial shipments typically cost $10-30/MT more than contract pricing. Sellers prefer large, ongoing volumes that justify relationship investment. Small one-time orders get marked up. On a 10,000 MT trial, that premium costs you $100K-300K extra compared to contract pricing.
Less Priority and Limited Availability
Sellers prioritize contract customers. If there's a supply crunch, trial buyers wait longer while contract customers get served first. You have less leverage in negotiations and might receive slower service.
Some sellers won't do trials at all. They have minimum volume requirements or only work with contract buyers. This reduces your supplier options and might force you into a contract before you're ready.
Repeated Setup Costs
Each new trial means starting from scratch: new due diligence, new documentation, new relationship building, new learning curve. This consumes time and effort. If you trial with three different suppliers before finding the right one, you've essentially paid the trial premium three times over.
Advantages of Full Contract
Better Pricing
Volume discounts of $10-30/MT are typical for contract commitments. On 100,000 MT annually, that's $1M-3M in savings compared to buying individual shipments. Over multi-year contracts, the savings compound significantly.
Supplier Commitment and Supply Security
When you commit to a contract, the supplier invests in the relationship. They prioritize your orders, provide better service, show more flexibility on terms, and treat you as a strategic partner rather than a transactional customer.
You also gain supply security. Product is reserved for you with consistent supply and predictable delivery schedules. This makes business planning dramatically easier – you know what's coming and when, allowing you to plan your operations, sales, and cash flow accordingly.
Efficiency and Better Terms
Once the contract is established, each shipment follows the same procedures. Processing is faster, there's less repeated setup work, and both parties know what to expect. This operational efficiency saves time and reduces friction.
Your contract volume also gives you leverage to negotiate better terms: favorable payment terms, flexible delivery schedules, quality guarantees, and other conditions that spot buyers can't get.
Disadvantages of Full Contract
Higher Risk
You're committing $5M-50M+ in total value. You're locked in for the contract duration – often 6-12 months or longer. If problems emerge, exiting is difficult and potentially expensive. If the supplier fails or product quality degrades, you're stuck dealing with it while under contractual obligation.
This is especially risky with an unproven supplier. A bad trial costs you hundreds of thousands. A bad contract costs you millions.
Less Flexibility
Once you sign, you're committed to the terms. You can't easily switch to a different supplier who offers better pricing. You have quantity commitments to fulfill. Your price is locked in – which protects you if markets rise but hurts you if markets fall. Adjusting specifications, delivery schedules, or other terms requires renegotiation and potentially contract amendments.
Complexity
Contract negotiations are complex. You're dealing with force majeure clauses, dispute resolution mechanisms, quality specification details, delivery tolerances, payment terms, penalties for non-performance, and numerous other contractual provisions. This requires legal review, careful negotiation, and operational sophistication that first-time buyers often lack.
Recommended Strategy for First-Time Buyers
Start with a trial of 5,000-20,000 MT. This limits your risk, lets you learn the process, verifies the supplier's reliability, and builds your confidence in petroleum trading.
After the trial completes, evaluate the results honestly. Was the supplier reliable with delivery and communication? Was product quality good and documentation proper? Were procedures smooth or did you encounter constant issues? Most importantly, do you want to continue working with this supplier?
If the trial was successful, negotiate a full contract. You now have leverage – you've proven you're a real buyer, and the supplier has proven they're a real supplier. Use this successful trial to negotiate better pricing, commit to larger volumes, and secure ongoing supply.
If the trial failed or revealed problems, you try a different supplier. You've only lost the cost of one trial shipment, not locked yourself into a bad relationship worth millions. Find a better supplier and repeat the process.
This strategy minimizes risk while building toward better contract pricing once you've verified the supplier.
For Experienced Buyers
If you've bought petroleum before and know the process, you can consider going straight to a contract under the right conditions: You've verified the supplier thoroughly through references and due diligence. The supplier has strong references from other buyers you trust. You're comfortable with petroleum trading procedures and documentation. Your volume justifies the commitment. And the risk is acceptable given your capital and business situation.
Experienced buyers can skip the trial phase because they know what red flags to look for, what questions to ask, how to verify suppliers, and how to structure protective contract terms. The trial premium isn't worth it when you have the expertise to assess suppliers without it.
Hybrid Approach: Trial with Option
The smartest structure for many buyers is a trial with an option for a full contract: "10,000 MT trial with option for 12-month contract of 50,000 MT/month if successful."
This gives you the best of both worlds. You start small with limited risk. But if the trial works, you can activate the contract at pre-agreed pricing without renegotiating. The supplier knows there's potential for a larger relationship, so they treat your trial more seriously than a pure one-off order. And you have a clear path to better pricing without committing upfront.
Negotiate the trial at a slightly discounted price compared to normal trial pricing – not as good as contract pricing, but better than a standalone trial. Pre-agree on the contract pricing that would apply if you exercise the option. And establish clear success criteria for moving to the contract phase (on-time delivery, quality specs met, proper documentation, etc.).
This approach is often ideal because it balances risk management with pricing optimization.
Typical Trial Sizes
Trial sizes vary by product. For EN590 diesel, typical trials run 5,000-10,000 MT while contracts are 20,000-100,000 MT monthly. Jet Fuel A1 trials are usually 5,000-15,000 MT with contracts at 25,000-50,000 MT monthly. Crude oil trials are larger – 25,000-100,000 barrels – with contracts ranging from 500,000-2,000,000 barrels monthly.
These ranges give you a sense of what's considered reasonable in the market.
Questions to Ask Yourself
Deciding between trial and contract comes down to honest self-assessment:
Is this my first petroleum purchase? If yes, start with a trial. If you're experienced, you can consider a contract.
How well do I know this supplier? New supplier means trial. Proven supplier with strong references from trusted sources could justify a contract.
What's my risk tolerance? Low risk tolerance points to trial. If you can handle substantial risk and have capital to weather problems, a contract becomes possible.
What's my volume need? Just testing the market or exploring options? Trial. Ongoing large volume need for your operations? Contract makes sense.
What's your price sensitivity? If you need the absolute best pricing, you'll eventually want a contract – but do a successful trial first. If you can pay a premium for flexibility and risk reduction, trial is your answer.
How to Negotiate
When negotiating a trial shipment, signal the potential for more: "I'd like to start with 10,000 MT trial. If successful, we'll discuss an ongoing contract for 50,000 MT/month." This positions the trial as a test phase rather than a one-off, which might get you better trial pricing because the supplier sees the larger opportunity.
For contract negotiation, lead with volume: "For a 12-month commitment of 50,000 MT/month, what's your best pricing?" This leverages your volume commitment for maximum discounts. Then negotiate all terms upfront – payment, delivery, quality specs, inspection rights, everything – before signing.
Bottom Line
Trial shipments offer lower risk, let you test suppliers and learn the process, and provide flexibility. The cost: a $10-30/MT premium. They're best for first-time buyers or when working with new suppliers.
Full contracts deliver better pricing ($10-30/MT savings), supply security, and supplier commitment. The tradeoff: higher risk and less flexibility. They're best for experienced buyers working with verified suppliers.
The recommended approach for most buyers: Start with a trial if it's your first petroleum purchase or you're working with a new supplier. If the trial is successful, negotiate a contract with better pricing. Build an ongoing relationship with proven suppliers through multi-shipment contracts.
The hybrid option – trial with option for contract – often provides the best structure. You start small and grow if successful, balancing risk management with pricing optimization.
Don't let pricing pressure push you into a contract before you're ready. Yes, the trial premium costs more per ton. But that premium is insurance against much larger potential losses from committing millions to an unproven supplier. Better to pay $200K extra on a trial than lose $5M on a fraudulent contract.
Take Action
Specify whether you're looking for trial or contract in your RFQ on CommoditiesHub. Our verified suppliers can accommodate both approaches based on your experience level and risk tolerance.