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Minimum Volume Commitment
A minimum volume commitment is a contractual obligation requiring a buyer or shipper to move or purchase a specified minimum quantity over a period.
In oil markets, such commitments are common in pipeline, terminal, and supply agreements. They provide revenue certainty for infrastructure owners.
Failure to meet the commitment may trigger penalties or deficiency payments. Traders must forecast flows accurately to avoid unnecessary costs.
Minimum volume commitments introduce fixed obligations that shape trading flexibility and risk profiles.