North Sea Brent Crude
Categories: Econ
"Brent Crude." Sounds like a retired cop for hire, one who takes no guff and lives by his own rules, right?
But alas, no. Way more pragmatic. North Sea Brent Crude is a grade of crude oil, the fuel that is still making the world go ‘round. Called Brent Crude for short, which is pumped out of the North Sea, Brent Crude serves as a benchmark price for global crude oil. About two-thirds of crude oil is priced based off of North Sea Brent Crude.
It’s “Brent” crude because it’s from the Brent oil field. Out of irony or out of pity we’ll never know, but Shell UK Exploration and Production named the Brent oilfield after the brent goose. They named all of their oil fields after birds. ExxonMobil and Royal Dutch Shell are the ones who were paying for Shell UK to find oil fields, including Brent. Who knew brent geese lay golden barrels of oil?
Why does Brent Crude get to tell all of the other oil barrels how they are priced? Two main reasons: first, because it’s old. Brent Crude had first-mover advantage, so it’s a veteran in the oil world. Second, because it’s how you like your coffee—light and sweet. Light (low density oil) and sweet (low sulphur content) crude processes easier, so it sells for more. Think: luxury petro, although there are more luxurious oils out there, like West Texas Intermediate.
Since North Sea Brent Crude is so widely used as a benchmark price, investors can use Brent Crude pricing as a proxy for oil markets. You can even invest in Brent futures, or one of the many options tied to North Sea Brent Crude, in you want to get your neck in the game. Like with most commodities, there are traders who try to profit on the spread between Brent crude prices.
