Brent was originally listed on the "International Petroleum Exchange ("IPE")" in London which was bought by ICE and became "ICE Futures Europe" back in the late 90s. With the change in US oil production over the last decade Brent has become the world benchmark for crude oil.
While it is true that CME/NYMEX have a Brent contract it trades far less than the ICE contract.
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I noticed that the daily volume of BRN on ICE is rarely above 140k while CL can generally hit 150-200k per day. I was thinking its because brent is traded on other exchanges other than ICE. I would think brent should have higher volume than WTI, is this right?
There is a future contract called "crude oil financial futures" trading on Globex, it seems to be priced the same as brent - it follows brent movement as well. Is this brent futures as well?
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I'll dig up some historical numbers but those look wrong to me, unless your talking about just the prompt month. ICE Brent and NYMEX Light Sweet Crude (aka CL or WTI) both trade about 500,000 contracts a day (whole curve).
There's literally about 100 crude contracts on both ICE and Globex so I can not be sure exactly which one you mean. Brent is financially settled on both and ICE and NYMEX, there is no physical delivery. ICE and NYMEX also have 'financially settled' equivalent of the NYMEX Light Sweet Crude (aka CL or WTI) physically delivered contract.
I agree, always interesting to learn something new about the markets.
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Yes I do mean the front month contract only. As I'm not doing spreads at this point so my focus is just on the front month. I was running through the all the contracts to do with "oil" from my brokerage and I noticed this crude oil financial futures and it looks interesting so I was wondering what exactly it is.
Yup, thats what I noticed, my shallow understanding is brent "represent" a larger portion of the crude oil world wide (compared to WTI) so its volume should be higher. But probably as SMCJB has pointed out, multiple months contracts are traded each day ( definitely so by the professionals in the industry).
I'm thinking could it be day/retail traders/speculators are trading CL more than brent which results in higher CL volume? most of these traders probably don't hold their positions for long.
Still trying to understand what are the different factors moving the crude oil market on a day to day basis.
Last edited by jonc; November 28th, 2015 at 02:32 AM.
On Brent & WTI
Quoting myself from elsewhere here on the forum
NYMEX CL is a physically delivered contract while ICE WTI is a financially settled 'copy cat' contract based upon the NYMEX CL settlement price. Hence if you trade ICE WTI you do not have the physical delivery option that you do on NYMEX. Also there is more CL or WTI liquidity on NYMEX hence if you want to trade WTI I would suggest you do it on NYMEX,
Brent is a completely different commodity to WTI. Unbeknownst to most the NYMEX Crude Contract ISN'T a WTI contract, it's actually Light Sweet Crude contract. There are long list of crudes that you can deliver into the contract at varying price differentials. It get's called WTI though because that is the benchmark crude for the differentials and the crude that in reality is nearly always delivered. Similarly what we call Brent is not actually Brent any more. Brent production has declined to the point that have had to include other similar North Sea crudes. The Brent Index is now actually a BFOE index representing Brent, Forties, Oseberg & Ekofisk. (Brent in itself is actually 'Brent Blend' as it's a mixture of several different close proximity North Sea Fields.)
NYMEX's WTI contract calls for delivery to Cushing Ok. Many years ago mid-america was short crude, and hence WTI was for decades the most (or at least one of the most expensive) crudes in the world. The US imported crude and shipped it up pipelines into the midwest etc. Hence WTI regularly priced at Brent + Freight +Pipeline costs. Obviously with the change in US production, the addition of new pipelines, and the reversing of others (so crude can now flow from the Midwest to the Gulf Coast) things now look very different. Brent on the other hand is still what is called the "swing barrel" and the World Benchmark. North Sea, West Africa, Mediterranean crudes, all price relative to Brent and and flow/move to what ever area of the world has the highest prices to attract it.
ICE Brent is a financially settled vs a Platt's index. NYMEX Brent while being the 'copy cat' is also financially settled vs the same index so they are basically identical. There is more Brent liquidity on ICE though, so if you want to trade Brent do it on ICE.
Both exchanges offer exchange traded spreads, but ICE's implication is more advanced, but that doesn't make up for the drop in liquidity in WTI to justify it.
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Thanks, apart from retail traders who actually has little impact on the total volume traded, who are most likely to be the major buyers/sellers of CL and BRN futures respectively? Is it mainly based on the geographical location of the entity?