What is North Sea Brent Brent
North Sea Brent crude oil is a blended sweet crude oil recovered from the North Sea in the early 1960s. Brent crude oil has a relatively low sulfur content and a relatively high gravity on the American standard scale Petroleum Institute.
The price of North Sea Brent, classified as mild light crude, is the most widely used benchmark for other world oil markets.
BREAKDOWN Brent Brent from the North Sea
North Sea Brent crude contains a mixture of oils recovered from the North Sea oil field systems.
The categorization of this crude is a slightly sweet crude, due to its low density and low sulfur content. Light sweet crude oils are easier to transform into products such as gasoline because they contain a higher proportion of hydrocarbon molecules than other oils. Therefore, they tend to get higher prices in the commodity markets. Mild crude is a classification of petroleum that contains less than 0.42% sulfur. Sulfur is not desirable in crude oils because it decreases the yield of high-value refined products, including gasoline and plastics.
Benchmark crude oil is used as an investment tool by industry to set a point that will serve as a standard of comparison when evaluating different varieties of crude oil. Another important benchmark crude is West Texas Intermediate (WTI), which is lighter and sweeter than Brent from the North Sea. WTI futures and options are the most traded energy products in the world.
Investing in Brent crude from the North Sea
Since the oil crisis of the late 1970s, the vast majority of sales of crude petroleum products have taken place on the futures market. Brent futures are available on the Intercontinental Exchange in Europe as well as on the New York Mercantile Exchange. Options linked to the North Sea Brent benchmark are also widely available.
Investors generally negotiate commodity contracts related to Brent either as a hedge or on a speculative basis. Those taking up hedging positions include companies that produce and market crude oil, as well as refineries or other entities that process oil. Hedging strategies for companies in fuel-dependent industries, such as airlines, can also take advantage of Brent contracts.
For example, some hedging strategies involve trading Brent-related crack spreads, in which traders simultaneously take long and short positions in Brent crude and finished products that use Brent crude as a commodity. For these types of trades to bear fruit, the price gap between raw materials and finished products must widen over time. This type of contract could appeal to an oil refinery seeking to protect its profit margin from price volatility in the crude oil market.
History of crude oil in the North Sea area
This large North Sea deposit is bounded by the United Kingdom, Norway, the Netherlands, Germany, France, Denmark and Belgium. Active oil deposits include the Brent, Forties, Oseberg, Ekofisk and Ninian systems.
Petroleum was discovered in the region in 1859, but it was not until 1966 that commercial exploration of the fields was undertaken. Commercial exploration developed in the 1970s, just before the oil crisis of the Organization of the Petroleum Exporting Countries (OPEC). The first transport by pipeline shortly after 1975. The high quality of oil, coupled with regional stability in the North Sea area and fears of an OPEC oil embargo, made the cost of producing crude sea brent beneficial.
At the time of exploration, Shell UK Exploration and Production would name the production oil fields after the birds. The North Sea field takes its name from the Brent Geese, a North American species.