The Economist Explains: What is Brent Crude?

The Economist explains: What is Brent crude?

Brent Crude is the benchmark against which the majority of the 100m barrels of crude oil traded every day are priced. At the start of October the price of Brent crude rose above $85 a barrel, its highest level in four years. But the black stuff that makes up the Brent benchmark comprises a tiny fraction of the world’s extracted oil. Why is it used to determine the value of 60% of oil on international markets?

The international oil trade is relatively new. It was not until 1861 that the first deal between two countries was recorded, when the Elizabeth Watts, a cargo ship, took a consignment of oil from Pennsylvania to London. Before the second world war, oil was mainly traded regionally. After the war the market became increasingly global as the number of producers expanded. Its price was largely set by oil companies, and later by the 15 countries that make up OPEC, the oil-producers’ cartel. It is only since the late 1980s that prices have been determined by international markets. As crude oil differs in quality and availability depending on where it comes from, producers and traders need a reliable benchmark against which to judge the correct price.

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