Brent Crude Oil Trade at PMEX
Brent is a classification of fossil oil that serves as a globally accepted price benchmark for trading of crude oil. The classification is also referred to as light, sweet crude - light because of its low density and sweet because of its low sulfur content as compared to other benchmarks. Brent crude oil represents two thirds of the internationally traded crude oil supplies. The majority of Brent crude oil is extracted from the North Sea region.
Other well-known classifications of crude oil are the OPEC Basket and West Texas Intermediate (WTI). Historically, the price differences between Brent and other crude oil benchmarks have been based on differences in specifications and variations in demand and supply.
Previously, WTI was considered a more relevant benchmark but after the U.S. attained the status of the largest oil producing country, WTI price became of lesser interest to the traders, who were still buying Brent or oil from OPEC. Therefore, Brent is now considered a more realistic benchmark as compared to WTI. Moreover, investors also invest in spreads between Brent and WTI.
Since PMEX was established, WTI crude oil has been actively traded and now the Exchange plans to add Brent crude oil in its product portfolio. By introducing Brent crude oil, the Exchange will provide an excellent trading opportunity to PMEX market participants to hedge price risk, diversify portfolio and benefit from high volatility in prices and the prevailing spread between WTI and Brent.
The SECP has approved the PMEX Brent Crude Oil Futures Contract and the Exchange plans to list contracts of 10 and 100 barrel very soon. Both these contracts are US dollar denominated and cash-settled and their prices will be referenced to a global pricing benchmark i.e. Brent Crude Oil, listed at Intercontinental Exchange (ICE), London. .
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