Brent crude – definition and meaning

Brent Crude is a trading classification of sweet light crude oil. It is one of the main benchmark prices for oil in the world. The Brent Crude oil market is also known as the London Brent, Brent petroleum, and Brent Blend.

The Brent oil platform is located in the North Sea, and the oil extracted from the region can be used for the production of petroleum and middle distillates.

Brent Crude contains around 0.37% of sulphur (US English: sulfur), which makes it a sweet crude. However, it is not as sweet as WTI (West Texas Intermediate).

Brent GooseThe Brent Oilfield was named after the Brent Goose (Branta bernicla). (Image: Wikipedia)

Brent Crude used to be traded on the open outcry International Petroleum Exchange in London. However, in 2005 it began trading on the electronic IntercontinentalExchange (ICE) instead. Currently one contract of Brent Crude is equal to 1,000 barrels – the contracts are in U.S. dollars.

The name ‘Brent’ in the oil industry came from the naming policy of Shell UK Exploration and Production, operating on behalf of Royal Dutch Shell and ExxonMobil. It originally named all its fields after birds, which in this case was the Brent Goose. It is also an acronym of Broom(oseBerg), Rannoch, Etive, Ness and Tarber – the formation layers of the oil field.



Pricing of Brent Crude

The difference in price between Brent Crude and other major oil indexes occurs because of the physical differences in crude oil specifications and the day-to-day changes in supply and demand.

However, it should be noted that over the past few years Brent has been priced much higher than West Texas Intermediate (WTI), which is also known as Texas light sweet – a different grade of crude oil used as a benchmark in oil pricing.

According to The US Energy Information Administration, this major price spread between the two oil indexes has occurred because of an oversupply of crude oil in the interior of North America (WTI price is set at Cushing, Oklahoma).

Brent OilfieldThe Brent Oilfield is in the North Sea. (Image: Wikipedia)

The oversupply is thought to be the result of greater oil production from Canadian oil sands and tight oil formations (including the Eagle Ford Formation, the Bakken Formation, and the Niobrara Formation).

The Brent Index

The ICE Futures Brent Index is the weighted average of the prices of all confirmed 25-day Brent Blend, Forties, Oseberg, Ekofisk (BFOE) deals, in addition to qualifying intra day assessments for the previous trading day for the appropriate delivery months.

The ICE Futures Brent Index is reported on a daily basis and is used by the Exchange and ICE Clear Europe on expiry of the front month futures contract as the final cash settlement price.

Brent Crude Oil Prices


Video – Brent Crude vs. Light Crude

The difference between both benchmarks is as stark as ever. Independent Energy Analyst, Gaurav Sharma, comments.