Brent Crude Oil

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Brent Blend is a combination of crude oil from 15 different oil fields in the Brent and Ninian systems located in the North Sea. Its API gravity is 38.3 degrees (making it a “light” crude oil, but not quite as “light” as WTI), while it contains about 0.37 percent of sulfur (making it a “sweet” crude oil, but again slightly less “sweet” than West Texas Intermediate). It is used as a benchmark for pricing crude oil, along with West Texas Intermediate (WTI) crude oil.

Brent Crude Oil futures and options are traded on the Intercontinental Exchange, which also offers WTI futures. CME Group and Moscow Exchange offer Brent futures contracts as well.

Uses[edit]

Brent blend is ideal for making gasoline and middle distillates, both of which are consumed in large quantities in Northwest Europe, where Brent blend crude oil is typically refined. However, if the arbitrage between Brent and other crude oils, including WTI, is favorable for export, Brent has been known to be refined in the United States (typically the East Coast or the Gulf Coast) or the Mediterranean region. The production of Brent blend, like that of WTI, is on the decline, but Brent remains the major benchmark for other crude oils in Europe or Africa. For example, prices for other crude oils in these two continents are often priced as a differential to Brent, i.e., Brent minus $0.50. Brent blend is generally priced at about a $4 per-barrel premium to the OPEC Basket price or about a $1 to $2 per-barrel discount to WTI, although on a daily basis the pricing relationships can vary greatly.[1]

Two different prices, Dated Brent (which reflects crude oil to be delivered in the short term, over the period 10 days to one month ahead) and Forward Brent (which reflects crude oil to be delivered further forward in time, up to four months ahead) are two key components of the Brent complex.[2]

History[edit]

From the late 1980s to the early 2000s, Brent was relatively steady, other than a notable spike in 1990 and dip in 1999. It began a steady rise in 2004 that continued until 2008. In July of 2008, Brent peaked at around $145 and began to slide down again over a period of six months. However, Brent began to climb again and the climb was particularly evident in 2011.[3]

In February 2014, Ian Taylor, CEO of Vitol, made claims that Brent was becoming a less "efficient" benchmark due to North Sea oil supplies decreasing and an increase in the number of cargoes being shipped to Asia. Taylor also believes Brent should be widened to include grades from west Africa, Kazakhstan, Algeria, Russia and the United States.[4]

Data Quotes[edit]

The InterContinental Exchange (ICE) offers data quotes on a subscription basis.[5]

See Also[edit]

References[edit]