Brent Crude Futures is one of the most popularly traded energy contracts today within the oil industry.
Another similar oil product is the crude oil futures contracts from Shanghai International Energy Exchange, which is covered in the article “5 Things To Know When Trading Crude Oil Futures”.
Alternatively, traders can also find out all about different forms of oil products from Chinese exchanges including, INE Low Sulphur Fuel Oil (LFSO) Futures, DCE’s Palm Oil Futures, and INE Medium Sour Crude Oil Futures too.
Given the unique geopolitical circumstances that have surfaced to date, this article will feature research regarding the crude industry as well as details regarding the Brent Crude Futures.
1. Brent Crude is primarily Euro-Centric
Brent Crude is associated with Western Europe countries including, Germany, Belgium, the United Kingdom, Norway, France, Denmark, and the Netherlands. (The brent oil is drawn from the North Sea of Northwest Europe).
In addition, the Brent Crude oil itself consists of a basket of five different grades which are the Brent Blend, Forties Blend, Oseberg, Ekofisk, and Troll crudes, often referred to as BFOET. ICE Futures Europe also offers a crude outright – Daily BFOET (Platts) M2 Future as one of its product offerings.
In general, Brent Crude is a significant cornerstone of the UK’s oil and gas industry, and its futures are traded on the New York Mercantile Exchange (NYMEX) AND Intercontinental Exchange (ICE) in Europe.
2. Oil and Brent Crude Can Be Volatile
Affected by global and regional events, Brent Crude prices may be more susceptible to volatility.
To assess the market conditions of the oil and Brent Crude prices in 2023, the following is a snippet of fundamentals research on oil and petroleum products gathered by Orient Futures analysts.
“Most recently, the (European Union) EU and G7 set a price ceiling for Russian oil before the EU embargo sanctions took effect, moreover, the EU plans to evaluate and revise the price ceiling every two months from mid-January 2023. Prior to this revision, the Russian-Ukraine conflict had caused crude oil prices to maintain a substantial discount of 20-30 US dollars per barrel of benchmark crude oil. In the meantime, Russia has also refused to sell oil to countries that participate in oil price caps.
Globally, the changes in trade flows and recession expectations are a hedge against Russian supply risk. It is expected that the impact of G7 and EU price limits on changes in current trade flows is controllable, and it is difficult to significantly increase the level of short-term premiums. From China, the relaxation and improvements made on Covid policies are likely to drive short-termed optimism, however, the actual demand recovery will be slower due to the pandemic.
Overall, rising recession expectations will still suppress oil prices, while the changes in policies and trade flows among countries will alter prices.” – Orient Futures, 05.12.2022.
3. Brent Crude Futures is a Liquid Contract
With the diversity offered by Brent Crude Futures, physical traders can trade the oil complex by a wide margin. Prices on the Brent benchmark are often described to accurately reflect global demand and supply and are less controlled by speculators and market makers.
It is easy to enter existing futures contracts together with existing energy products such as natural gas. This also entails increased flexibility in executing hedging, arbitrage, and cross-arbitrage strategies for institutional traders.
With ICE’s brent crude futures contract, traders can also make use of the Brent-WTI spread to assess the price difference between U.S. and other countries or the WTI-Dubai spread. This will ultimately determine the positions to take and if the price differentials are worth trading.
Brent Crude Futures Contract (Intercontinental Exchange)
The Brent Crude Futures Contracts has the following specifications:
The contract size for Brent Crude Futures Contract has a minimum price fluctuation of one cent ($0.01) per barrel.
Trading shall cease at the end of the designated settlement period on the last Business Day of the second month preceding the relevant contract month (e.g the March contract month will expire on the last Business Day of January).
Contract months are for January, March, May, July, August, September, and November.
Trading Hours are from Monday to Friday, at these trading hours:
New York: Trading 8:00 PM – 6:00 PM/ 20:00-18:00
London: Trading 1:00 AM – 11:00 PM/ 01:00 – 23:00
Singapore 09:00 AM – 07:00 AM/ 09:00- 07:00
Brent Crude Futures symbol: B
4. Brent crude is used as a Benchmark
Brent Crude is widely used among the physical oil or the light oil markets as a benchmark in countries such as Europe, Africa, and the Middle East. The oil is extracted at sea and transported via underwater pipelines (a fast but older extraction method), but Brent remains a broader indicator of worldwide prices, pricing over three-quarters of the world’s traded oil.
The Brent Index is used as the cash settlement price for the Intercontinental Exchange (ICE) Brent Futures BASED ON ice Futures Brent Index at expiry.
On the other hand, the WTI (West Texas Intermediate) is the benchmark for the US light oil market and is regarded as a better quality. The oil is extracted with more advanced technology for fracking such as horizontal drilling, while the quality of the oil is a light sweet oil which is cheaper to refine.
5. ICE AND ICE SG primarily offer different forms of Brent products.
ICE Futures Europe offers Brent Crude Futures, Brent Crude Options, Brent Crude TAS Futures, and other forms of crude such as Crude Outright- Brent 1st Line Futures.
ICE SG offers a smaller contract for Brent Crude which is the Mini Brent Crude Futures (100 BBL).
Both exchanges offer electronic trading and cash settlement against the ICE Brent Index price for the last trading day of the futures contract.
Market News
On January 19, it is reported that the WTI crude futures fell below $79 per barrel on Thursday, data from the American Petroleum Institute also showed that US crude inventories increased by 7.6 million barrels last week, defying expectations for a 1.8-million-barrel decline.
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