Brent Crude

Monthly average Brent spot prices since May 1987 Brent Crude is a major trading classification of Sweet Light crude oil comprising Brent Blend, Forties Blend, Oseberg and Ekofiskcrudes (also known as the BFOE Quotation). Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum. The other well-known classifications (also called references or benchmarks) are the OPEC Reference Basket, Dubai Crude and West Texas Intermediate. Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to price two thirds of the world's internationally traded crude oil supplies. Originally Brent Crude was produced from the Brent oilfield. The name "Brent" comes from the naming policy of Shell UK Exploration and Production, operating on behalf of ExxonMobil and Royal Dutch Shell, which originally named all of its fields after birds (in this case the Brent Goose). Petroleum production from Europe, Africa and the Middle East flowing West tends to be priced relative to this oil, i.e. it forms a benchmark. However, large parts of Europe now receive their oil from Russia. Characteristics Brent blend is a light crude oil, though not as light as WTI. It contains approximately 0.37% of sulphur, classifying it as sweet crude, yet again not as sweet as WTI. Brent is suitable for production of petrol and middle distillates. It is typically refined in Northwest Europe. Brent Crude has an API gravity of around 38.06 and a specific gravity of around 0.835.

Trading The symbol for Brent crude is LCO. It was originally traded on the open-outcry International Petroleum Exchange in London, but since 2005 has been traded on the electronic Intercontinental Exchange, known as ICE. One contract equals 1,000 barrels (159 m3). Contracts are quoted in U.S. dollars. Each tick lost or gained equals $10. Pricing Prior to September 2010, there existed a typical price difference per barrel of between +/-3 USD/bbl compared to WTI and OPEC Basket, however since the autumn of 2010 there has been a significant divergence in price compared to WTI, reaching over $11 a barrel by the end of February 2011 (WTI: 104 USD/bbl, LCO: 116 USD/bbl). Many reasons have been given for this widening divergence ranging from a speculative change away from WTI trading (although not supported by trading volumes), Dollar currency movements, regional demand variations, and even politics. The depletion of the North Sea oil fields is one explanation for the divergence in forward prices. In February 2011 the divergence reached $16 during a supply glut, record stockpiles, at Cushing, Oklahoma and is currently (August 2011) above $23. Historically the different price spreads are based on physical variations in supply and demand (short term). Delivery dates In addition to the Intercontinental Exchange, Brent crude futures are also traded on the NYMEX, with the symbol BZ, and have delivery dates in all 12 months of the year. General Characteristics Brent crude oil is a light sweet crude oil from North Sea. It has API (American Petroleum Institute) gravity between 38-39 and has higher sulphur content than the other wellknown benchmark, WTI crude oil. Brent crude oil is a global benchmark for other grades and is widely used to determine crude oil prices in Europe and in other parts of the world. Brent is typically refined in Northwest Europe, but a major portion is been exported to the US Gulf and East Coasts, and also to parts of Mediterranean. It is more expensive than the Organization of Petroleum Exporting Countries (OPEC) basket, but lesser than West Texas Intermediate (WTI) because of higher sulphur content than the WTI crude. Categories of Brent Crude oil West Texas Intermediate (WTI) crude oil is of very high quality. Its API gravity is 39.6 degrees (making it a "light" crude oil), and it contains only about 0.24 percent of sulphur (making a "sweet" crude oil). WTI is generally priced at about a $2-4 per-barrel premium to OPEC Basket price and about $1-2 per barrel premium to Brent, although on a daily basis the pricing relationships between these can very greatly. Brent Crude Oil stands as a benchmark for Europe. India is very much reliant on oil from the Middle East (High Sulphur). The OPEC has identified China & India as their main buyers of oil in Asia for several years to come.

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Crude Oil Units (average gravity) 1 US barrel = 42 US gallons. 1 US barrel = 158.98 litres. 1 tonne = 7.33 barrels . 1 short ton = 6.65 barrels . Note: barrels per tonne vary from origin to origin. Global Scenario Oil accounts for 40 per cent of the world's total energy demand. The world consumes about 76 million bbl/day of oil. United States (20 million bbl/d), followed by China (5.6 million bbl/d) and Japan (5.4 million bbl/d) are the top oil consuming countries. Balance recoverable reserve was estimated at about 142.7 billion tones (in 2002), of which OPEC was 112 billion tones. OPEC fact sheet OPEC stands for 'Organization of Petroleum Exporting Countries'. It is an organization of eleven developing countries that are heavily dependent on oil revenues as their main source of income. The current Members are Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC controls almost 40 percent of the world's crude oil. It accounts for about 75 per cent of the world's proven oil reserves. Its exports represent 55 per cent of the oil traded internationally. Indian Scenario India ranks among the top 10 largest oil-consuming countries. Oil accounts for about 30 per cent of India's total energy consumption. The country's total oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its total oil consumption and it makes no exports. India faces a large supply deficit, as domestic oil production is unlikely to keep pace with demand. India's rough production was only 0.8 million barrels per day. The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai High, Upper Assam, Cambay, Krishna-Godavari and Cauvery basins. Balance recoverable reserve was about 733 million tones (in 2003) of which offshore was 394 million tones and on shore was 339 million tones. India had a total of 2.1 million barrels per day in refining capacity. Government has permitted foreign participation in oil exploration, an activity restricted earlier to state owned entities. Indian government in 2002 officially ended the Administered Pricing Mechanism (APM). Now crude price is having a high correlation with the international market price. As on date, even the prices of crude bi-products are allowed to vary +/- 10% keeping in line with international crude price, subject to certain government laid down norms/ formulae. Disinvestment/restructuring of public sector units and complete deregulation of Indian retail petroleum products sector is under way.

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Market Influencing Factors OPEC output and supply . Terrorism, Weather/storms, War and any other unforeseen geopolitical factors that causes supply disruptions. Global demand particularly from emerging nations. Dollar fluctuations. DOE / API imports and stocks. Refinery fires & funds buying. Exchanges dealing in Crude Futures The New York Mercantile Exchange (NYMEX) . The International Petroleum Exchange of London (IPE). The Tokyo Commodity Exchange (TOCOM).

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WHAT IS BRENT CRUDE AND WHY IS ITS PRICE SO MUCH HIGHER THAN REGULAR CRUDE OIL? Much has been in the media over the price of Brent crude oil, as yesterday it broke $100 for the first time in over 2 years. Most people dont know what Brent crude is and how its price differs from the benchmark oil contract that closed at $90.75 yesterday. Despite having only a few options to choose from when it comes to pumping gas in your car, there are actually 160 different internationally traded crude oils. The characteristics and quality of the crude make them different from each other. The 2 most common types of crude oil are West Texas Intermediate (WTI) and Brent. WTI is the benchmark in oil pricing and its price is what we see usually see in the media when they refer to the price per barrel of oil. WTI, also known as Texas Light Sweet Crude, usually commands a higher price due to its high quality. Also, WTI is used to refine larger portions of gasoline and has a huge demand in the U.S. Brent crude is referred to as sweet light crude. It is sourced from 15 different oil fields in the North Sea and is used for gasoline and middle distillates. Brent crude contains more sulfur than WTI, making it not quite as light. It is primarily used in the Northwestern European market and its price is often used to price oil in Asia and Europe. Usually, the prices of WTI and Brent are within $2 of each other and they shadow each others fluctuations. However, as of late that gap has widened significantly and the price of Brent crude is more than $10 higher than WTI. Usually WTI is refined on the East Coast of the United States and then shipped out as gasoline. However, at the moment there is an abnormal amount of domestic refineries that are down for maintenance and repair. To meet the demand European refineries are refining more Brent crude that is then being shipped to the U.S. This is causing the price of Brent to surge compared to WTI. If you are interested in trading Brent crude, there is a relatively new ETF, BNO, that tracks its price. Its already 20% in just the past 3 months.