Brent Crude

What is Brent Crude?

Brent crude is a commodity used as a major oil pricing benchmark.

Key Takeaways

Brent crude oil is a major global benchmark for oil.
Unlike West Texas Intermediate (WTI) oil, which is exclusively used in the United States, Brent crude is used in global trade.
Brent crude is best used in gasoline and petroleum-based products.
Seasonal demand, supply changes, and geopolitical tensions can impact the price of brent.
Changes in the price of Brent can have a downstream effect that influences many parts of the economy.

Why is Brent Crude a Key Benchmark?

As much as two-thirds of the world’s oil is priced in Brent crude. This is because Brent is a consistent, highly accessible, and standardized commodity that can be used in global trade.

Because oil is still used so widely across industries around the globe, Brent is an important benchmark for economic stability and global pricing.

What is Brent Crude Oil Used For?

Brent crude is used mostly in producing petroleum products. The oil is refined into petroleum, which then has a wide variety of uses, such as:

Gasoline
Diesel fuel
Jet fuel
Heating oil
Plastics
Chemicals and solvents
Fertilizers

Brent Crude vs. West Texas Intermediate (WTI)

Unlike West Texas Intermediate (WTI) oil which is used primarily in the United States, Brent crude is a global oil that’s transported across the world and used in global trade.

When it comes to WTI vs Brent, here’s what you need to know.

Brent Crude vs. West Texas Intermediate (WTI)

Brent Crude Pricing

It’s important to note that while Brent is extracted in the North Sea, the Organization of the Petroleum Exporting Countries (OPEC), is responsible for the majority of its production and distribution. Therefore, OPEC can have an influence on the price of crude.

If you want to know what is the current price of Brent crude oil, you can find the commodity priced on the New York Mercantile Exchange (NYMEX) financial market under the symbol “BZ”.

7 Factors Affecting the Price of Brent Crude Oil

Many factors play a role in the brent crude oil price. These can include:

Geopolitical tensions

Conflicts in the Middle East or in OPEC countries can have an outsized impact on the price of Brent crude.

Global production levels

A reduction in supply by oil-producing countries can lift the price of Brent higher.

Changes OPEC policy

OPEC produces 40% of the world’s oil, and changes to its reserves or other policies can impact oil prices across the board.

Seasonal changes in demand

A particularly cold winter can drive up the demand for heating oil, while summer travel ebbs and flows can also have an impact.

Sanctions

Such as trade restrictions on Iran, Russia, or other major oil producers.

Alternative oil production

Shale oil extraction and other technological innovations can reduce the need for Brent and lower its price.

Speculative trading

Financial institutions and investment funds can impact the price of oil through their investment decisions, especially in the futures markets.

Brent Crude’s Impact on the Global Economy

While the global economy is attempting to wean off of fossil fuels, oil is still a very important commodity in powering the lives of most people around the world. As a major benchmark for oil pricing, Brent crude can be seen as a signpost of economic activity.

When Brent crude begins rising in price, it can lead to higher fuel costs, which affects major industries like transportation, manufacturing, and heating. These price changes can have a downstream effect all the way to consumers.

There is also an impact on countries that import or export oil. Oil-exporting countries can make a significant amount of their revenue from oil, and price changes can affect their GDP and economic growth.

Meanwhile, heavy oil-importing countries rely on outside sources for their Brent crude and can see their costs rise and fall with changes in Brent prices.

The Bottom Line

Brent crude oil is an important benchmark in the global economic landscape. According to the Brent crude definition, while the oil is extracted in the North Sea, it’s the Middle East and OPEC that controls the oil’s production and distribution. When you see the price of Brent change, it can be a result of anything from geopolitical tensions to seasonal changes in demand or even speculative trading by investors.