"Find another agent," Khin Khin was told by the young couple who were her partners and had a prospective buyer for S$3 million of diesel oil. "We don't like this Agent X. Don't you have another one?" Agent X is a commodity agent with a vast network. It is not as if such agents are a dime a dozen unlike property agents.
So, I deduce that the young couple do not know much about the commodity trading business. The performance is closing the deal, not in having a prospective buyer or seller.
I had met Agent X some months ago and knew what he really had the knowledge and the network. He had a big scar on his left hand. "What happened to your left hand?" I asked. "Oh, the surgeon took a vein for my heart. I had quadruple by-pass."
I phoned him to find out what happened and to learn something about the oil industry as Khin Khin asked me whether there is a Malaysian quoted diesel price and that she must pay $99.90 per month to get the price.
Agent X said that the couple wanted the previous price quoted but this was not possible as they had not locked in with money. The previous price was $580/metric tonne and just today, it was $660 FOB/metric tonne. So, the couple was not happy. This showed that they had did not know how business was done.
Prices are quoted in Singapore at www.bunker.com. Look for MDC (marine diesel oil) for prices.
So there is no separate Malaysian quotation. Prices had gone up as the buyer had not confirmed. At 5,000 metric tonnes, it would be around S$3.5 million and the couple had to get the LC done first. The couple wanted the price to be $500 -$600 which was not possible as at Jun 14, 2010. Agent X had quoted $583 earlier but prices had shot up. I had read in the Straits Times something about diesel prices going sky high and the impact on Singapore's economy a few days ago.
Lock In, the money must be there in the form of the LC.
To confirm, a Letter of Credit (LC) must be opened and made payable to the Seller (Petronas). This means that the Buyer had to put the money into Khin Khin's company. Once the price is agreed, the money will be paid, FOB. If the LC is in the Buyer's bank, then no commission would be likely to be paid to Khin Khin. So, it was important that Khin Khin controlled the money matters.
Commission for Agent X is paid by Khin Khin's company, based on trust. This sounds dicey to me.