Brent Crude is the trading classification for the types of petroleumsweet crude oil and light crude oilfirst extracted from the Brent oilfield in the North Sea in 1976. The term Brent Crude also identifies the oil-well Brent Complex in the North Sea, in the north-west area of Europe. In finance, the term Brent Crude colloquially refers to a futures contract for Brent Crude Oil bought and sold in the Intercontinental Exchange (ICE).
In 2021, with the end of petroleum production in the Brent field, the ICE expanded the Brent Crude classification to include blends of petroleums from the Forties oil field added in 2002, the Oseberg oil field added in 2002, the Ekofisk oil field added in 2007, and the Troll oil field added in 2018 (known as the BFOET Quotation), and petroleum from Midland, Texas, added in 2023.
Also known as the Brent Blend, the London Brent, and Brent petroleum, the Brent Crude oil marker is the reference standard by which the grade of a petroleum is described as light petroleum, because it is of low density, and is described as a sweet petroleum, because it is of low sulphur content. The Brent Blend establishes the prices for approximately eighty per cent (80%) of the global trade in petroleum, especially the Atlantic-basin grades of petroleum, and, along with West Texas Intermediate (WTI), is one of two commercial benchmarks for establishing the prices of petroleum.
Brent Complex In finance, the term Brent crude refers to the prices of oil futures traded in the Intercontinental Exchange:
Brent crude oil monthly futures contracts Brent crude oil monthly forward contracts Brent crude oil weekly Contract-for-Difference (CFD) Dated Brent short-term assessed prices Brent-Forties-Oseberg-Ekofisk-Troll_WTI (BFOETI), Dated Brent, or Brent spot-market Brent oilfield crude oil blend ICE Brent Index
The Brent Complex facilitates the buying-and-selling of Brent crude oil, gathers data of the prices of the transactions (forward contract, CFD, Dated Brent), establishes reference-prices for other petroleum transactions (Dated Brent assessed prices, Dated BFOET assessed prices, forward traded-prices, futures traded-prices), and transfers the risk-of-loss of such transactions (via hedging in the forward markets and in the futures markets).
Brent crude oil futures contracts
ICE Brent crude oil futures The ICE Futures Europe symbol for Brent crude oil futures is B. It was originally traded on the open outcry International Petroleum Exchange in London starting in 1988, but since 2005 has been traded on the electronic Intercontinental Exchange, known as ICE. One contract equals and quoted in U.S. dollars. Up to 96 contracts, for 96 consecutive months, in the Brent crude oil futures contract series are available for trading. For example, before the last trading date for May 2020, 96 contracts, from contracts for May 2020, June 2020, July 2020 ... Mar 2028, April 2028, and May 2028 are available for trading. ICE Clear Europe acts as the central counterparty for Brent crude oil and related contracts. Brent contracts are deliverable contracts based on 'Exchange of Futures for Physicals' (EFP) delivery with an option to cash settle against the ICE Brent Index price for the last trading day of the futures contract.
CME Brent crude oil futures In addition to ICE, two types of Brent crude financial futures are also traded on the NYMEX (now part of the Chicago Mercantile Exchange (CME)). They are ultimately priced in relation to the ICE Brent crude oil futures and the ICE Brent Index.
Brent Crude Oil Penultimate Financial Futures, also known as Brent Crude Oil Futures, are traded using the symbol BB, and are cash settled based on the ICE Brent Crude Oil Futures 1st nearby contract settlement price on the penultimate trading day for the delivery month.
Brent Last Day Financial Futures, also known as Brent Crude Oil Financial Futures, are traded using the symbol BZ, and are cash settled based on the ICE Brent Crude Oil Index price as published one day after the final trading day for the delivery month.
Role in hedging Although price discovery for the Brent Complex is driven in the Brent forward market, many hedgers and traders prefer to use futures contracts like the ICE Brent futures contract to avoid the risk of large physical deliveries. If the market participant is using Brent futures to hedge physical oil transactions based on Dated Brent, they will still face basis risk between Dated Brent and EFP prices. Hedgers could use a Crude Diff or 'Dated to Front Line' (DFL) contract, which is a spread contract between Dated Brent and Brent 1st Line Future (the front month future), to hedge the basis risk. So a complete hedge would be the relevant Brent futures contract, and a DFL contract when the futures contract becomes the front month future. This is equivalent to a Brent forward contract and a CFD contract in forward contract terms.
Price difference with WTI
Historically, price differences between Brent and other index crudes have been based on physical differences in crude oil specifications and short-term variations in supply and demand. 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 Brent has been priced much higher than WTI, reaching a difference of more than $11 a barrel by the end of February 2011 (WTI: US$104/bbl, LCO: US$116/bbl).
In February 2011 the divergence reached $16 during a supply glut, record stockpiles, at Cushing, Oklahoma before peaking at above $23 in August 2012. It has since (September 2012) decreased significantly to around $18 after refinery maintenance settled down and supply issues eased slightly.
Many reasons have been given for this divergence ranging from regional demand variations, to the depletion of the North Sea oil fields.
The US Energy Information Administration attributes the price spread between WTI and Brent to an oversupply of crude oil in the interior of North America (WTI price is set at Cushing, Oklahoma) caused by rapidly increasing oil production from unconventional reservoirs such as Canadian oil sands and tight oil formations such as the Bakken Formation, Niobrara Formation, and Eagle Ford Formation. Oil production in the interior of North America has exceeded the capacity of pipelines to carry it to markets on the Gulf Coast and east coast of North America; as a result, the oil price on the US and Canadian east coast and parts of the US Gulf Coast since 2011 has been set by the price of Brent Crude, while markets in the interior still follow the WTI price. Much US and Canadian crude oil from the interior is now shipped to the coast by railroad, which is much more expensive than pipeline.US Energy Information Administration, Short-Term Energy Outlook Supplement: Brent Crude Oil Spot Price Forecast, 10 July 2010.
April 2020 WTI negative pricing and Brent vulnerability On April 20, 2020, the CME WTI futures contract for May 2020 settled at minus US$37.63 a barrel due to oil demand shocks from the COVID-19 pandemic, and to dwindling storage capacity at the futures contract delivery point at Cushing, Oklahoma. Brent settled for US$26.21 at the same time, for a difference of $63.84. While the oil demand shock and limited storage capacity affects both WTI and Brent futures contracts, Brent contracts have greater access to storage, and greater buffers to absorb demand shocks than the WTI contracts.
Brent futures contracts could theoretically access the storage capacity of all the shore tanks in North West Europe and of available shipping storage, while CME WTI contracts are restricted to storage and pipeline capacity at Cushing only. Brent futures contracts are traded in relation with Dated Brent and other contracts in the Brent Complex, allowing other contracts in the system to absorb demand shocks.
Up to April 20, most of the demand shock from the COVID-19 pandemic has been absorbed by Dated Brent contracts and Dated Brent quality differentials, which spared pricing pressure on Brent futures contracts. While Brent is more insulated to negative pricing by these factors than WTI, negative prices are still possible should oil demand and storage capacity fall further.
2026 Strait of Hormuz disruption In 2026, disruptions to shipping through the Strait of Hormuz affected the supply of Brent-linked crude oil to the international market. Before the disruption, around 20 million barrels per day of crude oil and petroleum products passed through the strait, representing roughly one-quarter of global seaborne oil trade. Average flows subsequently fell to about 2.7 million barrels per day during March, April and May. However, the conflict currently restricted through the waterway, which carries about one fifth of global oil supply.
The reduction in Middle Eastern exports coincided with higher Brent prices and declining global inventories. Brent settled above US$100 per barrels in September, while observed global oil inventories had fallen by approximately 507 million barrels between February and August. Governments responded by releasing oil from emergency reserves. International Energy Agency members agreed in March to make 400 million barrels available, while G7 countries announced a further release of 100 million barrels of crude oil and petroleum products in October.
Brent crude oil monthly forward contracts Brent crude oil monthly forward contracts started trading in 1983 as "open" contracts, or contracts that specify delivery month but not the delivery date. From 1983 to 1985, these contracts were for 500,000 barrels of Brent Blend crude, and were increased to 600,000 barrels after 1985. Deals were made bilaterally between two parties by telephone and confirmed by telex. Payment for deals were made 30 days after oil delivery. Since deals were bilateral and not centrally cleared like futures transactions, parties to the deal sought financial guarantees such as letters of credit to minimize counterparty credit risk. Contracts for one and two months forward were available in 1983, contracts for three months forward were available in 1984, contracts for four months forward were available in 1985, and contracts for at least four months are available for trading today.
Sellers of Brent forward contracts initially had to give buyers a notice of at least 15 days of intention to deliver. More recently, the notice period has expanded to 10 days to one month ahead. This shifted the front month of the Brent forward contract. For example, on May 4, the Front Month forward contract (also known as M1) is the July contract, the Second Month (M2) contract is the August contract, and the Third Month (M3) contract is the September contract.
Producers and refiners buy and sell oil on the market for wholesale trade, hedging, and tax purposes. Producers without integrated refinery operations, and vice versa for refiners without oil production, had to sell oil and could hedge oil price risk with forward contracts. Integrated oil producers (those with refinery operations) had the same motives, but had an extra incentive to lower taxes. Integrated oil producers faced taxes when transferring oil internally from production to refining operations. This practice became less prevalent with the introduction of tougher regulations in 1987.
These taxes are calculated based on a reference price originally set by BNOC and eventually calculated as a 30-day price average of spot prices before an oil transaction. Forward market prices tended to be lower than these reference prices a lot of the times, and integrated oil producers could profitably lower their tax obligations by selling oil on the forward market from their production operations, and buying back oil from unrelated parties for their refining operations on the same market. This practice became less prevalent with the introduction of tougher regulations in 1987.