Brent Crude Oil
What is Brent Crude Oil?
Brent crude oil is commonly found in parts of the North Sea off the U.K. and Norway. Brent crude oil is a blend of oils which makes up more than half of the world's globally traded supply of crude oil. This is why it is naturally used as the benchmark of crude oil around the globe.
Uses of Brent Crude Oil
Brent Crude oil is used in the same ways that other crude oil is, the difference being that it has a different sulphur content. The uses for crude oil once refined can include, but not limited to the production of:
- Heating Oil
Risks of Brent Crude Oil
Like any futures contract, there is always the possibility that the underlying asset i.e. brent crude oil will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of brent crude oil to rise), if this were to happen and the brent crude oil fell in price, your long position in brent crude oil will decrease in value.
With any commodity, supply and demand will affect the price dramatically if there is a change. This risk is one that should be monitored on a regular basis and adjusted to suit your risk parameters.
Mining of brent crude oil has an inherent risk with the level of costs associated with extracting the product from the earth. This can include, but not limited to: the cost of oil to fuel machinery, cost of labour or new tax regulations being implemented.