Analysis Of Brent Crude Oil Prices

3061 Words Apr 29th, 2015 13 Pages
Overview Of ‘Brent’ Crude Oil:
The ‘Brent’ blend of crude oil is the most common form of crude oil used worldwide, with roughly two-thirds of all crude contracts around the world referencing the Brent blend (reference). ‘Brent’ oil is drawn from more than a dozen oil fields spanning across the North Sea off the coast of the UK and Norway. This particular type of crude oil is also considered to be light and sweet (therefore low sulfate), making it ideal for refiners to make gasoline and diesel fuel (). Although the ‘Brent’ is destined for European markets, it forms more than half of the worlds globally traded supply of crude oil. 1.1 Historical And Current Trends In ‘Brent’ Crude Oil Prices:
1.1.1 Long Run Trends:
Historically, the prices of ‘Brent’ crude oils have been highly volatile, with prices being sensitive and reacting to a wide range of geopolitical and economic events. The graph below shows the significant volatility in crude oil prices, particularly WTI oil (per barrel), over the past 45 years in response to various political and economic events:
Graph 1:
Source: U.S. Energy Information Administration, Thomas Reuters

Although this graph refers to WTI oil, it is important to consider that in general, world oil prices move together due to arbitrage, thus signifying that the price of ‘Brent’ oil followed a similar pattern to WTI. The price of ‘Brent’ crude oil, similarly to the changes in price of the WTI in the graph above, had an average overall…
Open Document