The relationship between the three main players in the industry, suppliers, buyers, and distributors, presents a fascinating opportunity to explore. You can check this website to get an automated trading experience by accessing the best-in-class trading bots and trading strategies. It offers insight into how these relationships are established based on each party’s unique needs.
The overall goal is to provide an overview of the cryptos involved in the oil trading supply chain and highlight those that may be considered “hot” by buyers or sellers at any given time. In doing so, we hope to shed some light on the “external” factors that influence the crypto marketplace.
The three leading players in the oil and gas supply chain are ‘upstream’ providers, ‘midstream’ distributors, and ‘downstream’ consumers. The below-mentioned portion explains which cryptocurrencies are involved with each of these roles. It will examine how this complex web of relationships affects the cryptocurrency market.
Table of Contents
Three leading players in the oil industry:
Upstream:
The upstream providers (oil and gas providers) have traditionally been national or multinational companies with large asset bases, significant production capacity, and market dominance to leverage pricing. In addition, several of the top companies in this category are state-owned enterprises with a dominant market share in their respective markets.
Midstream:
The midstream distributors are the companies that move oil, natural gas, and NGLs around a network infrastructure. Individuals can easily break the major midstream companies into the significant moving pieces that make up the global oil and gas supply chain. These companies provide banks, commodities exchanges, trading houses, shipping services, and consultancy firms with direct access to oil and gas assets.
Though these midstream companies work in tandem with upstream providers and buyers to orchestrate an efficient commodity supply chain from an end-user perspective, they often compete directly with one another for business opportunities on a country-by-country basis. Because of this, a single midstream company may have several regional offices with competing interests.
Downstream:
The last group of companies we will look at are the downstream consumers. This segment includes individual end users who are not directly involved in the entrepreneurial process but have the economic capacity to affect the market through spending decisions. These end users include energy and chemical companies, oilfield services providers, and retail distributors.
A problematic aspect for these consumers is that buyers don’t always know precisely where their petroleum is coming from or who is buying it from them at any time. Moreover, the midstream companies supply upstream and downstream markets in every part of the world, resulting in a complex web influencing the demand for cryptocurrencies.
Which cryptocurrencies are popular in the oil trade?
The cryptocurrencies famous in the oil trade are as follows:
Bitcoin:
The most popular cryptocurrency in the oil and gas industry is bitcoin. It is used by upstream and downstream players in various revenue-generating activities. In the upstream, bitcoin has proven to be a valid payment option in countries such as Russia, Nigeria, Azerbaijan, Kazakhstan, and many others that are pretty centralized economies with less government control on transparency. In addition, the bitcoin blockchain maintains a record of every transaction ever made on the network, making it an ideal form of payment for companies that cannot manage traditional banking systems in their countries.
Ethereum:
Ethereum has been a popular alternative to bitcoin for payments made by midstream energy companies. The Ethereum network allows for services and apps to be built on the blockchain while still allowing all transactions to be made with ether (the token found on the Ethereum blockchain). This flexibility is a significant benefit for developing new applications that streamline business processes.
One of these apps is an execution system developed by VAKT Energy, an energy trading platform. The VAKT system utilizes smart contracts that can write directly to the Ethereum blockchain and automatically trigger actions such as transferring funds between two parties. This type of technology helps midstream companies operate more efficiently, encouraging oil and gas providers to integrate cryptocurrency into their businesses.
Cardano:
It has been gaining popularity in the blockchain ecosystem since its initial coin offering (ICO) in October 2017. Many industry experts predict it may even compete with Ethereum as a primary platform for developing dAPPs and intelligent contracts because of its state-of-the-art technology. One feature that makes Cardano particularly attractive to energy traders is its ability to perform peer-to-peer transactions by removing the need for centralized exchanges.
Cryptocurrencies are becoming an integral part of everyday life, especially in frontier markets for oil and gas like the Middle East and Africa or countries with highly centralized governments such as Nigeria, Kazakhstan, or Venezuela.
Is anyone buying oil with cryptocurrency?
Recently, the world’s largest private crude oil buyer used bitcoin to buy a shipment of oil from the United States. A UK-based company called Vitol Group was responsible for this transaction and has hinted that it may result in more purchases of oil using cryptocurrencies shortly.