Brent Oil ICE European Futures Contract
The Brent Oil ICE (Intercontinental Exchange) futures contract is a global benchmark of oil prices, and reflects the price of oil this is physically delivered. The ICE Brent Crude futures contract has the option to be exchanged for physical (EFP) oil or cash settled versus the ICE Brent Index which is priced on the last trading day of the futures contract. The Exchange publishes a cash settlement price on the subsequent day following the last trading day for the contract month.
The ICE Brent Index reflects the average price of trading in the BFOE (Brent-Forties-Oseberg-Ekofisk) cash or forward market in the calendar month that the futures contract is expected to be delivered as reported and confirmed by the industry media. According to the Intercontinental Exchange web site, only published cargo size, which is equivalent to 600,000 barrels trades and assessments are used in the calculation of the ICE Brent Index.
Brent Oil Overview
The ICE Brent Oil Futures contract is traded in the Intercontinental Exchange and is considered one of the global benchmarks for oil trading. Brent is used to determine the prices of European, Middle Eastern and Asian oil prices. The contract is based on delivery of cargos that are traded in the over the counter market that deliver the grades of Brent, Forties, Oseberg or Ekofisk. This is also referred to the BFOE 21-day market.
Brent Crude is a light sweet crude oil, that is used to refine product such as gasoline and diesel. This grade is light because it has a low-density characteristic, and sweet because of its low sulphur content. Brent Crude is produced and developed from the North Atlantic Sea and is composed of a Brent Blend, Forties Blend, Oseberg and Ekofisk crudes.
The Brent Oil contract is traded in U.S. dollars per barrel and there are 1,000 barrels per contract. The minimum price change is $0.01 per barrel or $10 per contract. Trading of a given calendar futures contract terminates on the last Business Day of the second month preceding the relevant contract month, according to the ICE web site. The settlement price is the weighted average price of trades during a two-minute settlement period.
The ICE Brent Crude futures contract is a deliverable contract which is exchange for physical delivery with an option to cash settle against the ICE Brent Index price. Premiums or discounts can exist for physically delivered cargos versus the Brent Index price. The contract trades in consecutive calendar months for 96-consecutive months. Trading hours for the ICE Brent Futures contract are as follows:
|NEW YORK||8:00 PM – 6:00 PM (20:00 – 18:00)||7:55 PM (19:55)|
|LONDON||12:00 AM – 10:00 PM (00:00 – 22:00)||11:55 PM (23:55)|
|SINGAPORE||8:00 AM – 6:00 AM (08:00 – 06:00)||7:55 AM (07:55)|
How to Trade Brent Oil
The ICE Brent Oil Futures contract trades around the clock and experience price fluctuations based on a several factors. Producers and consumers of oil use the futures market to hedge their oil exposure by buying and selling oil at a future date. For example, a producer of Brent oil might consider locking in future oil production by selling a futures contract 1-year from the current period, and delivering physical oil into the sold futures contract.
The supply and demand of oil is reflected by inventories that are held throughout the globe. Brent oil is used by consumers all-over the globe and attractive because it is light sweet oil. Inventories levels reported by the U.S. Department of Energy help traders determine the amount of oil available.
The largest supplier of crude oil is the Organization of Petroleum Exporting Counties. This cartel of oil producers, provides data on current global supply and demand. This information along with the inventory readings supplied by the U.S. Department of Energy are the main gauges of supply and demand.