In 2023, the Brent oil benchmark, a key international oil price marker for global crude oil underwent a substantial change. It incorporated another key benchmark, West Texas Intermediate oil from Midland, produced in the US and sold into European and Asian markets. Brent is used to set prices for over 70 per cent of global crude oil, so this fundamental change in the composition of the benchmarks is making some observers question its future development and even its survival. Lessons from the past are very important for the future, particularly in this case.
This book revisits the history and genesis of the Brent oil benchmark and how it came to dominate the global oil market for oil. With chapters written by the individuals involved in trading and shaping the market, it brings the richness and texture to the usual historical narrative by recalling the events, companies and people who shaped its history. It introduces the historical background to the international oil markets and the reasons for a move from OPEC-set prices to oil benchmarks. It discusses the role of the North Sea in the international oil markets, as well as the role of the British government in the British national oil and gas monopoly (British National Oil Corporation or BNOC). The development of the North Sea oil, which coincided with the liberalisation policies in the UK and US, is also discussed, alongside the challenges of the oil exchange (International Petroleum Exchange) in London, the home of Brent and looks at the failures, attempted takeovers, and its eventual sale to the Intercontinental Exchange (ICE). It finally discusses the growing market ecosystem of the price reporting agencies (PRAs), which play a key role in establishing the value of the Brent benchmark.
Author(s): Adi Imsirovic
Publisher: Palgrave Pivot
Year: 2023
Language: English
Pages: 147
City: Cham
Contents
Notes on Contributors
1 Introduction
Complexity of Brent
Economic History as a Guide
The Layout of the Book
The Mission
Notes
References
2 The Age of Oil Benchmarks
OPEC Pricing System Collapses
Markets, Market Power, and Monopolies in the Oil Market
Oil Producers in Charge
Spot Markets and the Age of Benchmarks
Notes
References
3 Spinning—Like a Circle in a Spiral
Genesis
Exodus
Revelations
Brent Spinning—A Broker’s Perspective—Nigel Harris
Notes
Bibliography
4 Brent—Creating Exceptionalism
The First Sullom Voe Cargo
The Business of Trading
The Trader and the Tax Collector
Brent Teething Pains
The Wall Street Refiners
Place and People
Conclusion
Notes
Bibliography
5 Brent Legacy
Heather and Brent Partials
All Roads Lead to Brent
Physical, Forward and Futures Brent
Derivative Brent Contracts
Operational Tolerance and Brent ‘Chains’
Platts Window
Pure Brent Trading
Market Changes
Financialisaton
Convergence
Privilege
Notes
6 Brent Crude Oil Trading operations—The Rise and Fall of ‘Clocking’
History
Arrival of 15-Day Trading
Pass the Parcel
Failed Physical Market Squeeze
Book Outs
BP-ETSA-Phibro-Aron-Arcadia-TWO-ETSA-Shell-Refinery
Payment Terms
Paper Chase and Letters of Indemnity
15 Years of Operating Brent
Notes
References
7 Brent and the International Petroleum Exchange
Establishment of the IPE
Launch of Brent Futures
Demutualisation
Enron Online
Intercontinental Exchange
Acquisition of the IPE
The Transition to Electronic Trading
Regulated Benchmark
Evolution
Notes
Bibliography
8 Brent and the Price Reporting Agencies
Dawn of the Crude Oil Market
The Trouble with Crude Oil
Unintended Consequences of Tax Rules
PRAs—Volume, Transparency, and the Dawn of Real-Time Assessments
Evolving Methodologies
Brent Starts to Run Out and the Birth of “Pool Pricing”
Regulators Take an Interest
Twenty Years On
A Transatlantic Merger
Notes
9 Crossroads: Past, Present and Future of Brent
Crossroads—Present
Past
The Future of Brent
Notes
References
Index
