Banking Compliance in Oil Trading: SBLC, LC, and Escrow Explained

In petroleum trading—whether it’s EN590 diesel, Jet Fuel A1, or LPG—large volumes mean high financial risk. That’s why serious transactions always use secure banking instruments like SBLC, LC, or escrow.

This guide explains:

• What SBLC, LC, and escrow mean in fuel trading
• How they protect buyers and sellers
• When to use each payment method
• Common mistakes and fraud prevention

Why Banking Compliance is Critical

Petroleum deals often exceed tens of millions of dollars per shipment.

• Buyers need proof the seller really has the product
• Sellers need assurance the buyer can pay
• Banks provide the neutral guarantee to protect both sides

Without a secure payment instrument, you risk:

• Losing money to fraudulent “sellers”
• Wasting time on buyers with no real funds
• Delays at the terminal due to payment disputes

What is an SBLC (Standby Letter of Credit)?

SBLC = a bank’s guarantee of payment if the buyer defaults.

• Issued by the buyer’s bank in favor of the seller
• Acts as proof of funds (POF) for the seller
• Typically valid 30–90 days
• Only payable if the buyer fails to honor the contract

When it’s used:

• For trial liftings and spot deals
• To prove the buyer is financially capable

What is a DLC (Documentary Letter of Credit)?

DLC = a conditional payment instrument.

• Buyer’s bank releases payment once the seller provides specific documents (e.g., SGS report, Bill of Lading, POP)
• Safer for the buyer because payment is only made when conditions are met
• More complex than SBLC but gives full security

When it’s used:

• For long-term contracts (12-month SPAs)
• When buyers want stronger control before payment

What is Escrow in Oil Trading?

Escrow = third-party account holding funds until both parties meet obligations.

• Managed by a neutral escrow agent (law firm, bank, or licensed escrow company)
• Buyer deposits funds → escrow releases payment after POP/SGS is verified
• Popular for smaller spot deals or when parties are new to each other

Common Mistakes in Banking Compliance

❌ Accepting “bank statements” as proof of funds → can be easily faked
❌ Paying deposits without verified POP → high scam risk
❌ Using unfamiliar escrow agents → always vet them carefully
❌ Not specifying exact payment terms in the SPA → leads to disputes

How Saurin Inc Secures Transactions

We ensure ICC-compliant payment structures:

• ✅ SBLC or LC issued only from top-tier banks
• ✅ Escrow through licensed third-party agents
• ✅ POP, TSR, and SGS verification before title transfer
• ✅ Clear SPA clauses protecting both buyer and seller

Need Secure Banking for Petroleum Deals?

📧 sam@saurininc.com
📱 +1 706 587 6182 (WhatsApp)