Trading firms and oil dealers now have the chance to finalize crude oil deals on a blockchain-based platform. This is the first time such a move is being made and it promises to revolutionize the crude market. Such schemes have been piloted by commodities trading firms in the past. The blockchain doesn’t just make things more efficient for these companies, it also cuts cost.
Blockchain-based Trading Platform For Crude Oil
The first company to use this system is the London based platform – Vakt. The platform went live on Wednesday this week but no trade was completed that day. Blockchain technology is gradually becoming the to-go tech for many in different industries. It is often applicable in the settlement and trade industries. It reduces the risk of fraud and improves transparency during transactions.
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The company that intends to use the technology, Vekt, was created by a consortium in 2017. The consortium includes oil majors like Norway’s EquinorNorway’s Equinor, BP (BP.L), Mercuria Energy Group, Royal Dutch Shell (RDSa.AS), Koch Supply and Gunvor. For a start, only these firms will be able to use the platform. However, other firms will be able to trade on the platform from next year.
How Vakt Works
Vakt centralizes and digitized the process of buying and selling crude oil. This is something that is usually full of paperwork among both parties involved in the deal. The platform will be linked to a Geneva-based platform known as Komgo. This platform is going to provide financing for the system and offer digital credit letters.
Eren Zekioglu, the Chief IT and Operations Officer of Gunvor Group, said that the deal will make things easier for them. In his words:
“Vakt is a logistical arm. As soon as a deal is executed through the book of records, it will get pushed through Vakt. The next step will be financing with Komgo which will also link-up the dealers. Komgo gives participants access to various banks. It is going to go live before the end of the year. It is backed by more than 10 banks and almost all Vakt’s shareholders.”
Komgo will target everything concerning commodities trading from wheat to oil. The use of the platform will be limited to the five North Sea crude grades. These sea crude grades are the ones that are used to set Dated Brent. Dated Brent is the benchmark that is used to set the price for crude oil around the world.
In the first quarter of next year, Vakt is going to add bargers of refined products and crude pipelines within the United States and Northern Europe.
The head of trading at shell, Andrew Smith, said:
“We are excited. Collaborating with key players in the industry and our peers is an excellent way to combine expertise and achieve the scale we need to launch a digital transaction platform that will have a disruptive effect on how business is carried out around the world.”
Blockchain technology promises to transform the way the world works the more it is being adopted in different industries, the closer it will be to transforming the world.