Dated Brent is a benchmark price assessment published by S&P Global Commodity Insights, representing the price of physical, light North Sea crude oil. This assessment serves as a critical component of the Brent Complex, which encompasses trading in physically delivered oil and financially settled derivatives. The Dated Brent price is widely used as a pricing benchmark for crude oils globally and is often viewed as an indicator of global economic health.
Key Facts
- Assessment Periods: Over the years, the assessment periods for Dated Brent have been adjusted to keep pace with trading trends. The date range reflected in the assessments was widened to 10-21 days forward in 2002 and further widened to 10-25 days forward in 2012.
- Crude Grades: Dated Brent originally represented the Brent field, but as production volumes decreased, other crude oils were included in the assessment. In 2002, Forties and Oseberg were added, and in 2007, Ekofisk was added, completing what became known as BFOE (Brent, Forties, Oseberg, Ekofisk).
- Delivery Period Window: The assessed delivery period window for Dated Brent was widened to reflect 10 days to a full month-ahead forward in 2015, increasing the volume deliverable into the assessment window by more than 30%.
- Additional Crude Grade: In 2018, a fifth grade, Troll, was introduced to the basket of deliverable crudes in Dated Brent, further boosting physical volumes underpinning the complex.
- CIF Rotterdam Mechanism: In 2019, a significant change was made to the Dated Brent assessment process. The mechanism for CIF Rotterdam offers was introduced, allowing CIF Rotterdam values to be netted back to FOB-equivalent values using the grade’s Freight Adjustment Factor (FAF).
Assessment Methodology
S&P Global Commodity Insights assesses the Dated Brent price through a rigorous process that involves analyzing trading activity in the North Sea crude oil market. The assessment reflects the tradable, repeatable spot market value of the most competitive grade of crude oil at a specific time each day. Bids, offers, expressions of interest to trade, and confirmed trades are published during the Market on Close assessment process.
Evolution of Dated Brent
Over the years, the Dated Brent assessment has undergone several changes to keep pace with evolving market trends and trading patterns. These changes include:
- Assessment PeriodsThe assessment periods for Dated Brent have been adjusted to reflect changes in trading patterns. In 2002, the date range was widened to 10-21 days forward, and in 2012, it was further expanded to 10-25 days forward.
- Crude GradesInitially, Dated Brent represented the Brent field, but as production volumes decreased, other crude oils were incorporated into the assessment. In 2002, Forties and Oseberg were added, followed by Ekofisk in 2007, forming the BFOE (Brent, Forties, Oseberg, Ekofisk) assessment.
- Delivery Period WindowIn 2015, the assessed delivery period window was widened to reflect 10 days to a full month-ahead forward, increasing the volume deliverable into the assessment window by more than 30%.
- Additional Crude GradeIn 2018, Troll was introduced as the fifth grade in the basket of deliverable crudes in Dated Brent, further boosting the physical volumes underpinning the complex.
- CIF Rotterdam MechanismA significant change was made in 2019 with the introduction of the CIF Rotterdam mechanism. This mechanism allows CIF Rotterdam values to be netted back to FOB-equivalent values using the grade’s Freight Adjustment Factor (FAF).
Importance of Dated Brent
The Dated Brent price is a crucial benchmark in the global oil market, serving several key purposes:
- Pricing MechanismDated Brent serves as a pricing mechanism for physical cargoes of crude oil in the North Sea and is widely used as a reference price for crude oil contracts and transactions worldwide.
- Risk ManagementThe Dated Brent price is instrumental in managing price risk in the oil market. It enables market participants to hedge against price fluctuations and secure stable prices for their crude oil purchases and sales.
- Market IndicatorThe Dated Brent price is a leading indicator of global economic health. As a barometer of global oil demand and supply, it provides insights into the overall state of the economy and market sentiment.
Conclusion
The Dated Brent price is a critical benchmark in the global oil market, reflecting the value of physical, light North Sea crude oil. Through a rigorous assessment process, S&P Global Commodity Insights determines the Dated Brent price, which serves as a pricing mechanism, risk management tool, and indicator of global economic health. The evolution of the Dated Brent assessment over time demonstrates the adaptability and responsiveness of the methodology to changing market dynamics.
References
- S&P Global Commodity Insights. (2023). Dated Brent Price Assessment Explained. Retrieved from https://www.spglobal.com/commodityinsights/en/our-methodology/price-assessments/oil/dated-brent-price-assessment-explained
- ICE. (2023). Dated Brent Future. Retrieved from https://www.ice.com/products/6753541/Dated-Brent-Future
- Financial Times. (2023). ICE Brent Crude Oil Front Month. Retrieved from https://markets.ft.com/data/commodities/brent-crude-oil
FAQs
What is Dated Brent price?
Dated Brent price is a benchmark assessment published by S&P Global Commodity Insights, representing the price of physical, light North Sea crude oil. It serves as a critical component of the Brent Complex, which encompasses trading in physically delivered oil and financially settled derivatives.
How is Dated Brent price assessed?
S&P Global Commodity Insights assesses the Dated Brent price through a rigorous process that involves analyzing trading activity in the North Sea crude oil market. The assessment reflects the tradable, repeatable spot market value of the most competitive grade of crude oil at a specific time each day.
Why is Dated Brent price important?
Dated Brent price is a crucial benchmark in the global oil market, serving several key purposes:
- Pricing Mechanism: It serves as a pricing mechanism for physical cargoes of crude oil in the North Sea and is widely used as a reference price for crude oil contracts and transactions worldwide.
- Risk Management: It enables market participants to hedge against price fluctuations and secure stable prices for their crude oil purchases and sales.
- Market Indicator: It is a leading indicator of global economic health, providing insights into the overall state of the economy and market sentiment.
How has the Dated Brent assessment evolved over time?
The Dated Brent assessment has undergone several changes to keep pace with evolving market trends and trading patterns. These changes include adjustments to assessment periods, incorporation of additional crude grades, widening of the delivery period window, and the introduction of the CIF Rotterdam mechanism.
What are some key factors that influence the Dated Brent price?
The Dated Brent price is influenced by various factors, including:
- Supply and Demand: Changes in global supply and demand for crude oil can impact the Dated Brent price.
- Economic Conditions: Global economic growth and recessionary periods can affect the demand for crude oil and consequently influence the Dated Brent price.
- Geopolitical Events: Political instability, conflicts, and disruptions in oil-producing regions can impact the Dated Brent price.
- Weather Conditions: Extreme weather events, such as hurricanes and natural disasters, can disrupt oil production and transportation, affecting the Dated Brent price.
How is the Dated Brent price used in the oil market?
The Dated Brent price is widely used in the oil market for various purposes:
- Pricing: It serves as a reference price for physical crude oil transactions and is used in pricing formulas for various oil-related contracts.
- Risk Management: Market participants use the Dated Brent price to hedge against price fluctuations and manage risk in their crude oil trading activities.
- Benchmarking: The Dated Brent price is used as a benchmark for other crude oil prices and is often compared to other crude oil benchmarks, such as WTI and Dubai.
What are some of the limitations of the Dated Brent price?
While the Dated Brent price is a widely used benchmark, it has certain limitations:
- Regional Representation: The Dated Brent price primarily represents the North Sea crude oil market and may not fully reflect price dynamics in other regions.
- Assessment Methodology: The Dated Brent price is based on a specific assessment methodology, which may be subject to changes and adjustments over time.
- Market Volatility: The Dated Brent price can be subject to significant volatility due to various factors, such as geopolitical events and economic fluctuations.