Brent Crude oil is traded under the commodity code of BZ. The primary special feature of Brent Crude oil as a commodity is that crude oil futures contracts are the world’s most actively traded commodity. Crude oil also has the distinction of being the highest volume contract that is traded worldwide for a physical commodity.
Brent Crude oil is the benchmark for determining the pricing of two thirds of the worlds internationally traded crude oil supplies. Furthermore, Brent Crude oil is notable for the ease with which it is distilled into gasoline and middle distillates, due to it being a light, sweet crude blend. This refining process generally occurs in North West Europe, but it can be refined in the Mediterranean or the United States if market conditions are favourable for export.
Brent Crude oil futures are primarily traded on the Intercontinental Exchange (ICE) and the New York Mercantile Exchange (NYMEX). It is also possible to trade Brent Crude futures at other exchanges worldwide, such as the Dubai Gold and Commodities Exchange (DGCX) and the National Commodities and Derivatives Exchange (NCDEX) in India.
The main business market for Brent Crude oil is the fuel industry. Oil generally is the most widely utilised fuel source today, and is a massive part of the global economy. Oil and gas refineries are the largest market for Brent Crude oil, processing it to be sold on to consumers as petrol, diesel and gas. Large scale shipping companies also take a big share of the crude oil market, as they require it to fuel their fleets of cargo ships, trucks and planes.
Brent Crude oil is sourced from the the North Sea, and was named by the British fuel company Shell after a type of goose. As previously mentioned, its refinery is generally limited to North Western Europe, but this can change if the price to export it elsewhere is sufficiently low.
There are a huge numbers of factors that influence crude oil prices and the prices of Brent crude oil futures. The worldwide global economic cycle perhaps has the largest effect on the price of crude oil options as in periods of economic growth, energy consumption increases which drives up the demand for crude oil. This obviously increases the Brent Crude price proportionally. Similarly, the reverse is also true: in an economic slump, energy usage decreases along with demand and subsequently the price. Various political factors can also come into play. Oil refineries are sometimes favoured by activists as targets and this can lead to an increase in price if an oil well is damaged or destroyed. Although it is not as big a variable as with agricultural products, the weather can still affect crude oil prices as drilling platforms on the ocean may be destroyed or damaged by storms.
It is generally argued that there are no true spot prices for crude oil options, as there are no trades that operate in a fashion requiring large amounts of the physical product to be transferred over immediately to the buyer. The logistics involved in such a transaction would be completely unworkable, and for that reason Brent Crude futures prices are much more relevant for speculators on the market when compared to any quoted Brent Crude spot price