Sandy Fielden has put together a three-part series on the physical Brent crude market.

Part 1 explains the Brent crude as a benchmark for international pricing that underlies the ICE Brent futures contract – made up of crude oil produced in dozens of different North Sea fields and delivered to market in four different streams – Brent, Forties, Oseberg and Ekofisk (BFOE).

Part 2 details the linkage between the small Brent physical crude market that trades in 600 MBbl parcels costing upwards of $60 MM at today’s prices and the Brent ICE futures contract that trades in 1000 Bbl lots. Prices in the two markets are linked together by a cash settlement process using a Brent Index price based on forward trades in the physical market. The Brent Index settlement is an exchange for physical  (EFP) mechanism that ensures convergence between futures and physical markets.

This year the trading in the BFOE forward market has been limited to just 20 cargoes a month from the Forties stream. Part 3 describes the producers' efforts to increase market liquidity.