Oil trading: why is it a closed business?

Nikita Veremeev

21.08.2025 | 6 min read

Updated: 21.08.2025

Every day over 90 million barrels of oil are sold worldwide, and just about 100 companies control more than 80% of that volume. While global oil trade shapes state budgets and determines the stability of world financial markets, entering the oil market remains nearly inaccessible for new players. Why is international oil trade one of the most closed and regulated industries? What barriers and risks await entrepreneurs who decide to enter this market, and how can they be overcome?

Anyone considering registering an oil company in the EU, Asia, or Africa faces multi-layered legal, compliance, and operational obstacles. The complexities with oil trade licensing, financial monitoring, control of funds origin, and the need for beneficiary transparency are just the tip of the iceberg. Ignoring these aspects can lead not only to investment loss but also to long-term sanctions or reputational consequences.

In this article, I will analyze in detail why the oil business is considered closed, what real barriers and risks exist for new players, and how the COREDO team assists clients not only in entering this market but also in building a sustainable, compliance-oriented business model. If you’re looking for more than superficial advice, but rather an in-depth analysis and practical solutions, I recommend reading to the end.

Oil Business: Why It Is Closed

Illustration for the section 'Oil Business: Why It Is Closed' in the article 'Why Oil Trade Is Considered a Closed Business'

The oil business is traditionally considered one of the most closed and difficult industries to enter. The reasons for this lie not only in high barriers and specific market rules but also in the unique structure of the oil market and the role of its main participants.

Structure of the Oil Market and Its Participants

International oil trade is a complex chain that includes oil extraction, transportation, trading, and export. At each stage, its own rules apply, and access to infrastructure and raw materials is controlled by a limited circle of participants. Major state-owned oil companies (NOCs) such as Saudi Aramco, ADNOC, CNPC, as well as global oil traders (Vitol, Glencore, Trafigura) form the core of the market. Their corporate structures for oil trading often include subsidiaries in key jurisdictions, specialized oil trading platforms, and a network of financial intermediaries.

In COREDO’s practice, there have been cases where even having direct contracts with suppliers didn’t guarantee successful market entry without access to logistics chains, terminals, and bank guarantees. For new players, not only is capital critical, but also strategic alliances that allow integration into the existing ecosystem of raw material trading.

Entry Barriers for New Companies

Entering the oil market requires significant investments: merely ensuring minimum supplies and insuring logistics can amount to tens of millions of dollars. Licensing oil trade in the EU, Asia, and Africa involves going through complex procedures, including corporate structure verification for oil trading, having qualified personnel, and implementing compliance systems.

The COREDO team has completed projects registering oil companies in the EU and Asia, where the key obstacle was not only the financial threshold but also the need to confirm the transparency of fund sources and market experience. Competition among traders stimulates the formation of strategic alliances, without which access to infrastructure and large contracts is practically impossible.

Geopolitics and Economics: Key Factors

Geopolitical risks and international sanctions directly impact oil trade restrictions. Trade embargoes, oil export duties, and currency control in several countries make the market inaccessible to companies without stable international connections and compliance expertise.

A real case from COREDO: a client faced payment blocking when exporting oil to Asia due to tightened currency control and changes in international sanctions lists. The solution developed at COREDO included a comprehensive check of the counterparties chain and the implementation of alternative financing tools.

Legal Barriers in Oil Trade

Illustration for the section 'Legal Barriers in Oil Trade' in the article 'Why Oil Trade Is Considered a Closed Business'

Legal barriers in oil trade are influenced by various national and international regulations that often complicate companies’ entry into global markets and determine rules of competition and access to infrastructure. The peculiarities of oil market regulation in the EU, Asia, and Africa directly affect trade mechanisms and the strategic planning of industry participants.

The impact of these features requires a more detailed review of the specific regulatory conditions in each of the mentioned regions.

Regulation of the Oil Market in the EU, Asia, and Africa

Registering oil companies in the EU, Asia, and Africa requires accounting for national and international regulatory standards of the oil market. In the EU, key regulators include ESMA and national financial authorities, in Asia – MAS (Singapore), FSC (Hong Kong), and in Africa – specialized agencies and ministries of energy. Licensing requirements for oil trade include not only capital source confirmation but also implementing compliance procedures in accordance with EU AML directives and FATF recommendations.

At COREDO, we accompany clients at all stages of oil company registration, developing individual strategies considering jurisdiction specifics. For example, registering an oil company in Singapore requires a local director and corporate secretary and a comprehensive check of all beneficiaries and funds sources.

Table: Comparison of Requirements for Oil Company Registration

Jurisdiction	Minimum Capital	License	Local Director	AML/KYC	Registration Time
EU	€50,000+	Yes	Yes	Yes	2-4 weeks
Singapore	$1	Yes	Yes	Yes	1-2 weeks
Africa	$10,000+	Yes	Depends on country	Yes	3-8 weeks

AML and KYC for Oil Companies

AML for oil companies is not a formality but a key element of access to international oil trade. EU directives and FATF recommendations require the implementation of mandatory KYC procedures for oil traders, regular financial monitoring, and funds origin control in the oil business.

COREDO’s practice confirms: even minimal non-compliance with standards can lead to account blockages and the inability to conduct SWIFT payments.

In 2024, AML requirements for oil companies have tightened significantly: new standards for beneficiary identification have appeared, the lists of suspicious operations have expanded, and control over shell companies has intensified. Our experience at COREDO showed that implementing automated transaction monitoring systems and regular audits of oil deals are the best practices for minimizing compliance risks.

Beneficiary Transparency, How to Verify Sources of Funds

Modern regulation requires disclosing all hidden beneficiaries in the oil business, combating the use of shell companies, and implementing mechanisms for controlling fund sources. Financial investigations are becoming standard practice when registering oil companies in the EU and Asia.

The solutions developed at COREDO include comprehensive verifications of corporate structure, analysis of beneficial ownership, and the implementation of transaction transparency tools.

Risks of Sanctions Evasion for Oil Traders

Illustration for the section 'Risks of Sanctions Evasion for Oil Traders' in the article 'Why Oil Trade Is Considered a Closed Business'

Risks of sanctions evasion for oil traders are becoming increasingly relevant against the backdrop of tightening international restrictions and expanding sanctions lists. Using evasion schemes helps maintain export volumes but is accompanied by additional costs and increases legal and reputational risks for market participants.

Next, we will consider how sanctions and embargoes affect oil export and the activities of oil traders.

Sanctions and Embargoes: Impact on Oil Export

Export sanctions on oil and trade embargoes are major factors making the market closed to new companies. International sanctions by the EU, USA, UK, and a number of Asian countries limit access to financing, logistics, and even to oil trading platforms. Violating the sanctions regime leads not only to financial but also criminal consequences, as well as long-term reputational risks.

In COREDO’s practice, there were cases where even indirect involvement in transactions with sanctioned countries led to account blockages and banks denying services. Compliance Due Diligence and oil deal audits become mandatory elements for all market participants.

Under such strict restrictions, market participants are forced to develop alternative business methods,including schemes for oil re-export and sanctions evasion.

Schemes for Oil Re-export and Sanctions Evasion

Despite the tightening of control, sanctions evasion schemes in oil trade continue to be used: offshore schemes, oil re-export through third countries, alternative supply routes, SWIFT payments through affiliated banks, bank guarantees in oil deals. On the other hand, such schemes carry high legal and reputational risks.

Table: Common Sanctions Evasion Schemes and Their Risks

Scheme	Description	Main Risks
Offshore Companies	Using shell companies	Financial investigations, account blocking
Re-export through Third Countries	Supplying oil through neutral countries	Violation of sanctions, criminal liability
Alternative Payments	Using SWIFT/alternative currencies	Transaction blocking, bank denial

COREDO’s practice shows that sustainable business models are built not on circumventing restrictions, but on transparency and compliance.

Legal and Reputational Risks – What Are They?

Long-term consequences of violating the sanctions regime include not only fines but also loss of access to financial markets, inability to conclude strategic alliances, and deterioration of ESG indicators. Managing reputational risks in the oil sector requires implementing compliance standards, regular audits, and transparency of the corporate structure.

Tax Risks in the Oil Business

Illustration for the section 'Tax Risks in the Oil Business' in the article 'Why Oil Trade Is Considered a Closed Business'

Tax risks in the oil business are becoming more significant every year due to tighter tax regulations and the revision of industry benefits. In these conditions, optimizing company structure in oil trading becomes a key tool for minimizing tax losses and maintaining financial sustainability.

Optimizing Company Structure in Oil Trading

The right corporate structure for oil trading: a key to asset protection and minimizing tax risks. Depending on jurisdiction, registering oil companies offshore can provide flexibility but requires strict adherence to tax residency requirements and beneficiary disclosure.

The COREDO team develops individual schemes, considering the specificities of international oil trade, corporate governance requirements, and protection from financial investigations.

Scheme: Corporate Structure for International Oil Trading

Holding company (EU/Asia)
Operating company (offshore/Asia)
Trading platform
Bank accounts in EU/Asia/Africa

Tax Risks in Financial Reporting

Tax risks for oil companies include double taxation, financial reporting requirements, and mandatory audit of oil deals. The EU and Asia are strengthening control over transfer pricing and financial transparency.

Solutions implemented by COREDO allow minimizing the tax burden through the right choice of jurisdiction, implementation of international reporting standards, and regular audits.

Financing in Oil Deals

Financing oil deals requires using oil derivatives, engaging financial intermediaries, and adhering to currency control. Under sanctions and restrictions, classic tools (letters of credit, bank guarantees) are complemented by alternative settlement schemes. COREDO’s practice confirms: diversifying financing instruments and implementing compliance procedures ensure financial security and business model sustainability.

How to Enter the Oil Market with Minimal Risks

Illustration for the section 'How to Enter the Oil Market with Minimal Risks' in the article 'Why Oil Trade Is Considered a Closed Business'

Entering the oil market is inevitably associated with high volatility and numerous specific risks, so minimizing losses requires a systematic and conscious approach to each activity stage. One of the key tools for risk reduction: thorough counterparty verification and conducting due diligence, which will help avoid costly mistakes at the market entry stage.

Counterparty Verification: How to Conduct Due Diligence

Compliance due diligence – a basic element for new oil market participants. Modern technologies allow tracking oil origin, conducting KYC procedures for oil traders, and identifying hidden beneficiaries.

At COREDO, we implement automated counterparty verification systems, significantly reducing fraud and compliance violation risks.

Checklist: Compliance Procedures for Oil Traders

Identification and verification of beneficiaries
Funds origin verification
Transaction monitoring
Regular audits and KYC file updates

Legal Support and Compliance – Recommendations

Choosing a jurisdiction, registration support, compliance procedure implementation, and financial monitoring – key elements of a successful market entry. COREDO’s experience shows that integrating legal support of oil deals with compliance expertise allows not only passing licensing but also building lasting relationships with banks and partners.

How to Scale a Business Model?

Scaling the oil business in Asia and Africa involves particular challenges: regulatory differences, infrastructure instability, high demands on ESG factors. COREDO solutions include developing strategic alliances, implementing sustainable business model standards, and regular compliance risk assessments.

Recommendations for Entrepreneurs

Entering the international oil trade market is not only a matter of capital but also a deep understanding of legal, compliance, and operational barriers. Main challenges: oil trade licensing, registering oil companies in the EU, Asia, and Africa, implementing AML/KYC procedures, managing reputational risks, and minimizing tax burden.

COREDO’s practice confirms: a comprehensive approach, including legal support for oil deals, compliance in the oil industry, and international standards implementation, allows not only entering the closed market but also building a sustainable, transparent, and profitable oil business.

Prospects for oil trading development amid global changes: belong to those companies that invest in compliance, ESG, and process digitalization. If you are looking for a reliable partner for registration, licensing, and support of an oil company in the EU, Asia, or Africa – COREDO solutions will help realize even the most ambitious tasks, minimizing risks and ensuring long-term success.

Why is oil trading considered a closed business