North Sea Brent Crude

North Sea Brent Crude

North Sea Brent Crude is a blended light sweet crude oil recovered from the North Sea in the early 1960s. The high quality of the oil, coupled with regional stability of the North Sea area and OPEC oil embargo fears, made the cost of production of the North Sea Brent crude beneficial. Pricing for North Sea Brent crude, classified as a sweet light crude, serves as the most widely used benchmark for other worldwide oil markets. Pricing for North Sea Brent crude, classified as a sweet light crude, serves as the most widely used benchmark for other worldwide oil markets. North Sea Brent Crude is a blended light sweet crude oil recovered from the North Sea in the early 1960s.

North Sea Brent Crude is a blended light sweet crude oil recovered from the North Sea in the early 1960s.

What Is North Sea Brent Crude?

North Sea Brent Crude is a blended light sweet crude oil recovered from the North Sea in the early 1960s. Brent crude oil has relatively low sulfur content and a relatively high gravity on the American Petroleum Institute’s standard scale.

Pricing for North Sea Brent crude, classified as a sweet light crude, serves as the most widely used benchmark for other worldwide oil markets.

North Sea Brent Crude is a blended light sweet crude oil recovered from the North Sea in the early 1960s.
Pricing for North Sea Brent crude, classified as a sweet light crude, serves as the most widely used benchmark for other worldwide oil markets.
Light sweet crude oils are simpler to process into products such as gasoline, which means they tend to fetch higher prices on commodity markets.
Since the oil crisis of the late 1970s, the vast majority of crude oil commodity sales have taken place on the futures market.
Investors typically trade Brent-related commodity contracts either as a hedge or on a speculative basis. Those taking hedge positions include companies that produce and market crude oil, as well as refineries or other entities that process the oil.

Understanding the North Sea Brent Crude

North Sea Brent crude contains a blend of oils recovered from the oilfield systems in the North Sea.

Categorization of this crude is as a light-sweet crude, due to its low density and low sulfur content. Light sweet crude oils are simpler to process into products such as gasoline because they contain a higher proportion of hydrocarbon molecules than other oils. Therefore, they tend to fetch higher prices on commodity markets. Sweet crude is a classification of petroleum that contains less than 0.42 percent sulfur. Sulfur is undesirable in crude oils because it lowers the yield of high-value refined products including gasoline and plastics. 

Benchmark crude oil serves as an investment tool for the industry in setting a point to act as a standard of comparison when evaluating different varieties of crude oil. Another significant benchmark crude is West Texas Intermediate (WTI) which is lighter and sweeter than North Sea Brent crude. WTI futures and options are the most actively traded energy products in the world.

Investing in North Sea Brent Crude

Since the oil crisis of the late 1970s, the vast majority of crude oil commodity sales have taken place on the futures market. Brent futures are available on the Intercontinental Exchange in Europe as well as the New York Mercantile Exchange (NYMEX). Options linked to the North Sea Brent crude benchmark are also widely available.

Investors typically trade Brent-related commodity contracts either as a hedge or on a speculative basis. Those taking hedge positions include companies that produce and market crude oil, as well as refineries or other entities that process the oil. Hedging strategies for firms in fuel-dependent industries, such as airlines, may also take advantage of Brent-related contracts.

For example, some hedging strategies involve trading on crack spreads related to Brent, in which traders take simultaneous long and short positions in Brent crude and finished products that use Brent crude as a raw material. For these types of trades to pay off, the price differential between the raw materials and the finished goods must widen over time. This type of contract might appeal to an oil refinery seeking to protect its profit margin from price volatility in the crude oil market.

History of North Sea Area Crude Oil

This large North Sea deposit is bounded by the United Kingdom, Norway, the Netherlands, Germany, France, Denmark, and Belgium. Active oil fields include the Brent, Forties, Oseberg, Ekofisk, and Ninian systems.

Oil was discovered in the area in 1859, but it was not until 1966 that commercial exploration of the fields was undertaken. Commercial exploration grew in the 1970s, just before the Organization of Petroleum Exporting Countries  (OPEC) oil crisis. The first pipeline transportation shortly after 1975. The high quality of the oil, coupled with regional stability of the North Sea area and OPEC oil embargo fears, made the cost of production of the North Sea Brent crude beneficial.

At the time of exploration, Shell UK Exploration and Production would name production oilfields after birds. The North Sea field derives its name from the brent goose, a North American species.

Related terms:

American Petroleum Institute

The American Petroleum Institute (API) is a leading oil and gas industry trade association.  read more

Benchmark Crude Oil

Benchmark crude oil is petroleum that serves as a pricing reference, establishing standards for comparison for varieties of crude oil.  read more

Brent Blend

Brent blend is a type of sweet crude oil that is used as a benchmark for the prices of other crude oils. read more

Commodity Market

A commodity market is a physical or virtual marketplace for buying, selling, and trading commodities. Discover how investors profit from the commodity market.  read more

Crude Oil & Investing Examples

Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. read more

New York Mercantile Exchange (NYMEX)

The New York Mercantile Exchange is the world's largest physical commodity futures exchange and a part of the Chicago Mercantile Exchange Group. read more

Organization of the Petroleum Exporting Countries (OPEC)

OPEC or the Organization of the Petroleum Exporting Countries consists of the major oil-exporting nations. Read about OPEC’s impact on oil supply and prices. read more

Sweet Crude Defined

Sweet crude is a type of oil with very low amounts of sulfur. It is considered a valuable and efficient source of petroleum products. read more

Upstream

Upstream refers to the exploration and production stages in the oil and gas industry. Upstream is followed by the midstream and downstream segments.  read more

West Texas Intermediate (WTI)

West Texas Intermediate is the underlying commodity of the New York Mercantile Exchange's oil futures contract and one of the main global oil benchmarks. read more