BRENT: Oil is the world’s most traded commodity, and Brent is the pricing benchmark for an estimated three-quarters of this trade. It includes over 600 related oil products and is managed by S&P Global division Platts. North Sea Brent oil production has continued to fall, with loadings down 40% the past five years. Whilst the US is now a net exporter. The Brent price calculation will now start to include Midland Texas oil from the Permian basin, to help boost its liquidity. This will start from June, with those futures contracts already trading. Expect a modest anchoring of Brent prices, with Midland crude at a price discount to Brent (see chart), and smaller premium to WTI. And a transition as participants adjust to the new benchmark properties and cargo sizes.
US: This underlines the changed oil market reality. The US is now the world’s largest producer, at over 12 million bbls per day, equal to 12% of global supply. It is also an increasing exporter, with WTI Midland regularly used by European refiners. It’s hard to believe that from 1975 to 2015 the US banned the export of domestic crude oil. Brent is a waterborne crude market with access to global shipping, port, and storage capacity. It is widely refined globally. This makes it different from other landlocked or regional crudes like US’s West Texas Intermediate (WTI).
LIGHT SWEET: Brent is a light sweet crude benchmark established in the 1980’s. This is the first addition of a blend from outside the UK and Norway in its history. Light oil requires less processing and produces a greater percentage of refined products like gasoline and heating oil. Whilst a sweet oil has low sulphur levels, that requires less refining. Brent oil sulphur content is under 0.5%, whilst its API gravity (lightness) is around 38. By contrast the heaviest and highest sulphur crude is Mexican Maya at over 3% sulphur, and with an API gravity of under 25.
All data, figures & charts are valid as of 10/04/2023