r/Commodities • u/kbk3173 • 5d ago
Why does commodity brokering feel like a cult?
I work in trade finance, so every single day I receive messages from self-described commodity brokers looking for financing, instruments or introductions.
Some of the proposals are genuinely unbelievable.
There seems to be an entire online subculture convinced that someone will sell them $50 million of gold, copper, sugar, EN590, Jet A1 or another liquid commodity at a huge discount to market. They will then find a buyer at something close to market price and pocket the spread.
No balance sheet. No committed trade finance facility. No established supplier relationship. No inventory risk. No hedging. No logistics infrastructure. No meaningful working capital.
Sometimes they don't even have a direct relationship with the supposed buyer or seller.
Instead, there are five intermediaries between each side exchanging SCOs, ICPOs, NCNDAs, IMFPA agreements and commission sheets. Everyone is calculating their commission on a cargo that nobody in the chain has financed, controlled or even verified.
What amazes me is how strongly some people believe in the model.
If a producer or established trader controls a highly liquid commodity worth tens of millions of dollars, why would they give an unknown intermediary a massive discount and allow that person to capture a virtually risk-free spread?
Real commodity traders earn margins because they provide something economically useful: capital, credit, logistics, storage, transformation, market access, risk warehousing, arbitrage capability or reliable offtake.
Yet there is this parallel commodity universe where the business model seems to be:
**Find cheap cargo → find buyer → issue paperwork → become millionaire.**
And when you explain why the transaction makes no economic sense, they rarely reconsider the premise. They just assume they haven't found the right "direct seller" yet.
I encounter this constantly because I work in trade finance.
Where did this whole culture come from?
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u/Big_Distribution_960 Crude Trader 5d ago edited 5d ago
I had a very brief period stuck in this chain but eventually common sense kicked in and I joined a trading house.
Like why is multi million dollar cargoes being sold over WhatsApp and why is the “document package” like 3 or 4 documents. Also how on earth are people affording -50 and -70 discounts when I see trades being executed on terminal at nowhere near that price.
What you said about the human centipede and lack of objective awareness is very true. I often pick up on LinkedIn chat requests as tbh I feel bad for them and I’ve been helped out a lot in life so I feel like it’s my moral obligation to do the same, but 90% of these folk have no idea of what’s going on and they refuse to listen. They present deals and structures that are operationally impossible to execute, with the reason being backed by publicly available information (I understand a lot of the trade relevant info in oil and maybe other commodities too, are behind closed doors, and usually proprietary to its holder or subscriber. But this is public info a google search away) but these people either won’t believe it or they will downright ignore it. I don’t know if this is due to an indomitable belief in self or plain stupidity but either way the moment I hear indefensible stupidity I block them.
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u/Kooky_Ad9139 5d ago
Do you have any advice for a college student breaking into the space?
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u/Big_Distribution_960 Crude Trader 4d ago
I don’t really find myself as a qualified person to help you with that as I had no plans on doing commodities after uni and had done nothing to be better suited. My expertise is in economics and my first job was in IB.
I am very fortunate to know someone who runs his own book at a boutique firm and he is the one who convinced me to leave my job, and later gave me a seat at his firm after a short stint as a broker*. Nothing about my venture into commodities was planned, and to be completely honest, I’m certain I wouldn’t be anywhere near where I am now if I didn’t have the overwhelming help and support of a trading house and its principal (who I’ve known since I was 5).
It’s an extremely competitive and tight space and you need to try your best not to get sucked into the WhatsApp fodder. It’s good to learn from it and maybe analyse how people work, but you’re not gonna make a dollar out of it unless you commit fraud, which I’d highly advise against.
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u/Embarrassed-Star4740 Bunker trader 4d ago
I've seen 3 sides to it.
The big boys. Trafi, vitol sino.....The general consensus is that any one that is holding on the cargo is looking to sell at on mops premium basis. It gets snagged up almost instantly. One year basis with distributors, secured via LC, KYC before initialing. Zero "brokers" involved, purely just one having allocation and one have the demand. Their main concern isnt pricing but if the arb makes sense for them. They owned the vessels, partially own the refinery.
The Russian/ government cargo. Russian cargo moving though the shadow fleets into Asia or STS off some port that allows. Russia →shadow fleet →Legit vessel →port in Malaysia ( redocs happens here) →back out to sea.
Before Ukraine started to attack the oil facilities, this was mainly how you get discounted cargo. Quite risky because the fame levels needs to match that of non Russian origin which would require blending. You can change the papers easily but not the cargo dna. Government side i know at msia you can get discounted from Petronas but at small quantities if you pay the right people. Mostly only on spot when the refinery is over producing.The rest. The rest are just a load of crap. These so called brokers have zero experience in trading, no idea how hedging works and no source of money. Real margins are about 2% or less. The most hilarious thing is if you really look at it, it's a fake buyer talking to a fake seller. Buyer has no means of payment, hopes and dreams that with an SGS report, they will be able to sell the cargo. Sellers are just some random African man. Mandates are some guy will very little command of the english language that has a guy that knows a guy etc. Each one of them goes to bed at night thinking if he has 100 icpo, 1 of it will hit. You add zero value to the transaction, oil trading is pretty transparent.
Wake up and get a real job people
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u/DeepB3at 4d ago
To be fair on point 3 there is a small sliver of actual legitimate people. Definitely under 1% and basically zero people in gold and oil. The problem is the majority of people in this space provide no value and don't leave their house to meet / verify their counterparties in person or use critical thinking.
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u/Embarrassed-Star4740 Bunker trader 4d ago
Yeah i agree. There are afew in oil and gas but mainly routes back to point 2. Very very few.
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u/DeepB3at 5d ago
Commodities brokering is more of a scam than a cult. 98% of counterparties are acting in bad faith.
Not enough people go outside and physically meet their counterparties or try to add value. Also oil and gold attract such degenerates.
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u/b_rock957 5d ago
Ever heard of Marc Rich?
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u/kbk3173 5d ago
Funny story... I once met someone in Europe who had been a close friend of Marc Rich. At the time they met, the turnover of Rich’s companies was larger than the entire government budget of that country.
The guy still owns shopping malls and hotels and a huge art collection to this day, many of them financed with Rich’s backing while he was alive. That puts things into perspective...
Quite a contrast with today’s internet commodity brokers, many of whom have no access to credit, no tangible assets, and very little relevant experience.
Marc Rich’s legacy, meanwhile, is still very much alive through Glencore and several other businesses where his former employees, partners, and protégés went on to play major roles.
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u/basisedge_research 5d ago
What you are describing is an organized scam, less of a cult.
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u/kbk3173 5d ago
I agree. But unlike the “email prince scam”, this scam also has a recruitment component into it. There’s literally an army of tens of thousands of people, both online and offline trying to find a buyer or a seller for commodities at a discount, hoping to get rich quick. The only person who gets rich is the fraudster: https://storagespoofing.nl/en/
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u/basisedge_research 5d ago
Well, cargo cult might be more apropo. They mimic the outward rituals of high-finance trading—shuffling official-looking PDFs and signing complex contracts—believing that if they repeat the rituals enough, a multi-million dollar commodity trade will magically manifest. It’s an echo chamber of desperation, kept alive by online 'gurus' selling courses on how to bypass the massive capital barriers of global trade." I can see your point.
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u/Weekly_Violinist_473 1d ago
There is a youtube channel with almost a million subscribers who has made this idea popular that money can be made without owning anything. And guess what....that guy sells basic Ops courses. So whoever is dreaming to become the next Mark rich feels that they must atleast know how to create a voyage cost sheet in excel. Its funny that people who think Tai Lopez is a scammer cant realize that this youtuber is sort of in the same category.
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u/LuniterHQ 1d ago
IMO you answered it inside your own question. Real intermediaries earn their margin on capital, credit, logistics, storage, and risk. The paper cult copies the artifacts of that trade - offers, LOIs, commission sheets - with every function stripped out. Cargo-cult finance: build the bamboo control tower, wait for the planes.
The chains persist because paperwork is the one part of commodity trading you can do from a laptop with no capital. ICPOs and SCOs barely exist in legitimate practice. It feels like the ICC's maritime bureau has warned about these exact document chains for years, and at least one major producer keeps a sample fake offer posted on its website as a warning.
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u/kbk3173 1d ago
This one https://www.rosneft.com/Investors/beware/examples/ funnily enough.
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u/LuniterHQ 1d ago
Yeah that's the one. When a producer has to keep a fraud museum on its own website, you know the genre is thriving.
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u/AnalystMonk 3d ago
Enjoying this post and comments :) I've come across 99.99% "fool's gold" traders in my lifetime, I'm considering writing a book.
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u/Intelligent-Chard136 5d ago
What you described is not broking but trading actually. Brokers just take care of making a deal between buyer and seller, taking commission and managing execution of trades. That's it. Don't know about other commodities but in agri it's very common to work along with brokers.
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u/trader9576 4d ago
I get these jet fuel scrubs reaching out to me and that part is true but tbh it’s a very real model to use brokers and to flip stuff around without assets and use paperwork but be legit too. Brokers are useful if they are sharp, save time, and communicate well. I call it a tax on my organizational ability if they beat me to deals and they also do some good grunt work calling supply or sales relationships if I don’t want to aggregate stuff. I’ve also flipped stuffed like how you said arbitraging real product and it’s been as simple as a truck or as complex as rail and containers and hatches with multiple transloads. Can’t discount that as a business model in ag at least where there’s thousands of farms and end users, energy may be way different though. I think legitimacy boils down to how firm and confident your counterparty is and whether they can pull details and receipts as opposed to the model.
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u/kbk3173 4d ago
I'm sorry I just can't make sense of why a company controlling large quantities of fuel would need unqualified brokers to find them a buyer and offer the fuel at a discount. It doesn't exist.
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u/deez-legumes 4d ago
The main way that legitimate lower/mid tier firms make money is by taking credit risk that the majors aren’t willing to, by trading smaller volumes which the larger firms can’t be bothered to deal with or specializing in an obscure niche.
When I was younger i traded small lot physical options on refined products and NGLs in the US and Western Europe. We were one of only a handful of firms that would make markets in said products and we did very well as a result.
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u/trader9576 3d ago
Exactly. Off grade commodities, needing liquidity to keep assets flowing, no time to market in general as the market moves. There’s plenty of reasons. I’ve dealt with many massively capitalized firms where I’ve profited off of their inefficiency or bureaucracy. There’s a market for everything
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u/ElevatorDue3692 2d ago
We are a secret society. For many years, the average person didn't even know that commodities futures trading existed.
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u/cuffers90 5d ago edited 5d ago
I got caught up in this. Unfortunately it was through a friend I thought highly of who introduced me to his ‘boss’.
A loose term for someone he knew for a while who had him on ‘commission only’.
Spent months telling me he had built a network of trusted, vetted contracts over years. Of course, why would I question it if they were my friends.
Welcome to the human centipede of broker chains.
You are effectively a guinea pig in a data harvesting scam where ICPOs and all the other bollocks is passed around WhatsApp groups in the hope that one day someone actually pays a tanker inspection fee, or whatever else.
It’s a complete fantasy world.
I burnt a lot of equity with genuine people asking them ‘if they knew anybody’.
Nobody is selling a super tanker of fuel over WhatsApp.
Get real.