A Futures Contract Based On Brent Crude Oil

BRENT FUTURES
What’s Brent crude oil? (Origin)
The original Brent Crude referred to a trading classification of sweet light crude oil first
extracted from the Brent oil field in the North Sea in 1976.[1] As production from the Brent
oilfield declined over time, crude oil blends from other oil fields have been added to the trade
classification. The current Brent blend consists of crude oil produced from the Brent, Forties (
2002), Oseberg (added 2002), Ekofisk (added 2007), and Troll (added 2018) oil fields (also
known as the BFOET Quotation).
It’s one of three major oil benchmarks used by trading oil contracts, futures and derivatives,
Brent crude is the most traded of all of the oil benchmarks, and is defined as crude mostly
drilled from the North Sea oilfields .
This oil type is widely used as it is both sweet and light (sulphur content roughly 0.37%; API
gravity 38.06), making it easy to refine into diesel fuel and gasoline.
Estimates by the UK Government’s Oil and Gas Authority for the total remaining recoverable
reserves range between 10 and 20 billion barrels of oil from the UK continental shelf alone.
Today, the BFOE basket of oils represents a daily output of around a million barrels per day:
The evolution of Brent from the Spot market to the Future Market
Brent Crude have been traded on the London-based International Petroleum Exchange (IPE)
since June 1988, using open-outcry trading. Three related markets comprise the Brent oil
complex, as follows: Brent that is available immediately , which is called dated or physical
Brent; forward Brent, which is for purchase or sale at a future date; and Brent futures, which
have standardized delivery times and amounts.
Brent Future Markets
It’s a futures contract based on Brent crude oil, a particular type of oil and one of the most
important oil price benchmarks in the world. We have different type of Brent market listed as
follow:
ICE Brent crude oil future: 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,[5] but since 2005 has been traded on the electronic Intercontinental Exchange,
known as ICE. One contract equals 1,000 barrels (159 m3) and quoted in U.S. dollar . The
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 future: In addition to ICE, the 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.
The purpose of the Brent future market
The Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to set
the price of two-third (2/3) of the world’s internationally traded crude oil supplies. So in order
to mitigate the risk related to high volatility and unpredictability of oil price on the Brent spot
and forward market, the Brent future market will be a useful management tools which will
have a certain numbers of features as follows:
 Standardized contract
 Legal obligation to buy or sell
 Traded on an exchange
 Small quantities
 Nominal mounts = months of delivery
 Nominal value = LOT size x number of lots x nominal price
 Expiry date
The mains purpose are hedging a price position for physical participant like refiners,
producers, end-users and speculating on the price volatility for speculators.
Are traded on the Intercontinental Exchange (ICE) with symbol B and priced in dollars. One
contract equals 1,000 barrels (159 m3). Each tick lost or gained equals $10. Brent crude futures
are also traded on the New York Mercantile Exchange (NYMEX) with symbol BB. In addition
to the above exchanges, it is also possible to trade Brent Crude futures at other exchanges
worldwide, such as the Dubai Gold and Commodities Exchange (DGCX). It has expiry dates in
all 12 months of the year.
Market specification
Trading Screen Product Name : Brent crude future

Trading Screen Hub Name : North Sea
Commodity Code :B
Contract Size : 1000 barrels
Unit of Trading : Any multiple of 1000 barrels
Currency : US dollars and cent
Trading Price : one cent (0.01$) per barrel
Contract Series : Up to 96 consecutive months
Trading Methods : Electronic futures, Exchange of futures for physical (EFP), Exchange
of futures for swap (EFS) and Block Trades are available for this contract.
Delivery/Settlement Terms :
The ICE Brent Crude futures contract is a deliverable contract based on EFP delivery with an
option to cash settle against the ICE Brent Index price for the last trading day of the futures
contract. The Exchange shall publish a cash settlement price (the ICE Brent Index price) on
the next trading day following the last trading day for the contract month.
CONCLUSION:
. the 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.
Established in 1988, the ICE Brent futures contract, is the world’s most liquid oil futures
contract and has expanded since inception to include a family of more than 400 related Brent-
based hedging instruments.

A Futures Contract Based On Brent Crude Oil

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BRENT FUTURES

What’s Brent crude oil? (Origin)

Brent Future Markets

The purpose of the Brent future market

Trading Screen Product Name : Brent crude future

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