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Logistics Cost
Logistics cost encompasses expenses related to transporting, storing, handling, and delivering crude oil or refined products. These costs are a critical component of physical oil trading economics.
Logistics include pipeline tariffs, shipping freight, terminal fees, demurrage, and insurance. Changes in logistics costs can significantly alter netback values and arbitrage viability between regions.
During market disruptions, such as port congestion or pipeline outages, logistics costs may spike, creating temporary price dislocations. Traders who understand logistical constraints can exploit regional price differentials.
Accurate modeling of logistics costs is essential for physical traders, as small miscalculations can turn an apparently profitable trade into a loss.