Every day, we source and supply commodities that enable the world’s growth because access to energy underpins economic prosperity.  

Promercium was established as a private limited company in 2016 by a group of petroleum engineers from the University of Leoben. Initially focused on a single regional market – Middle East (oil) – Promercium has since diversified and expanded globally. Promercium is an independent, employee-owned physical trading business present in Europe, the Middle East, Asia and Oceania. Due to culture of privacy and secrecy from the general public, the majority of founders remain unknown. The company’s chief executive is Maurice Pointner.

The “Mining City”

We are headquartered in Leoben, a Styrian city in central Austria, located on the Mur river. The city is known as the “Gateway to the Styrian Iron Road”. It is a local industrial centre and hosts the University of Leoben, which specializes in petroleum engineering, mining, metallurgy, and materials. Leoben was shaped for centuries by the trade in iron and the research in raw materials carried out at the university. Mining traditions still play an important part in city life. Our Leoben office is located vis-à-vis the university. The institution is known for its students from remote corners of the world, and its cosmopolitan and multi-cultural atmosphere. University graduates usually return to their home country to work for the biggest names in the oil, gas & mining industry.

A sample commodities trade.

A typical transaction will be buying Dubai Crude and moving it into Singapore, Asia's largest commodity trading hub. So let's assume you are buying a million barrels of oil from ADNOC, the Abu Dhabi National Oil Company. Negotiations have come to an end, contracts have been signed and a bank has confirmed finance.

To pick up the crude and take it to Singapore, you will have to deal with all the logistics and invoicing relevant to the movement of goods from point A to point B. To bring the goods to the named port of destination you have to hire a vessel on a voyage or time charter basis (CFR) and contract for insurance against the risk of loss of or damage to the goods during the carriage (CIF). Because of the cargo you have purchased but not yet sold, you are also concerned about falling prices. To protect yourself against a possible price drop, you can establish a short hedge so any loss incurred in the cash market will be offset by a gain from the hedge in the futures market.

Now, imagine that during the tanker's voyage to Singapore, the price of oil goes up 50 per cent. The value of your cargo will increase but the price increase will also result in a futures loss. Any losses on your futures position may result in a margin call, requiring you to deposit additional funds. To maintain the short hedge until the crude is sold in the cash market you have to cover day-to-day losses. Immediately upon the sale of the physical crude, the risk of falling prices no longer exist and the futures position is no longer needed.

As long as you get everything right, at the end of the day, the oil will be discharged into a storage or continue its journey on another vessel.

A sample hedge to give you a better idea of what we do.

Let’s suppose it is October, and you are a commodity trading company holding storage of Brent Crude you intend to sell at some point in the future. This is known as a long cash (physical) market position. The current cash market price for Brent Crude oil to be delivered in March is $78 per barrel. If the price goes up during that time you will gain. But if the price goes down, you will have a loss. So you are primarily concerned about falling prices during the coming months.

To protect yourself against a possible price decline, you can hedge by selling a corresponding number of barrels in the futures market now and buying them back later when it is time to sell your crude in the cash market. The ICE Brent Crude Futures contract has a contract size of 1,000 barrels. For example, to hedge 100,000 barrels, you, therefore, need to sell 100 Brent Crude futures contracts. To be hedged is to have opposite positions in the cash (physical) market and the futures (paper) market. If the cash price declines to $38/bbl, the loss incurred will be offset by a gain from the hedge in the futures market. This risk management strategy is called a short hedge, because of the initial short futures position.

Short hedge / Mar Price decline ➘ to $38/bbl

Cash Market Futures Market
Oct cash Brent Crude is $78/bbl sell Mar Brent Crude futures @ $78/bbl
Mar sell cash Brent Crude @ $38/bbl buy Mar Brent Crude futures @ $38/bbl
change $-40/bbl loss $40/bbl gain

sell cash Brent Crude @ $38/bbl

gain on futures position + $40/bbl

net selling price $78/bbl

Short hedge / Mar Price increase ➚ to $81/bbl

Cash Market Futures Market
Oct cash Brent Crude is $78/bbl sell Mar Brent Crude futures @ $78/bbl
Mar sell cash Brent Crude @ $81/bbl buy Mar Brent Crude futures @ $81/bbl
change $3/bbl gain $3/bbl loss

sell cash Brent Crude @ $81/bbl

loss on futures position - $3/bbl

net selling price $78/bbl

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