OT05321 - PRT: valuation of crude oils and products- category 1 oil Brent

Brent contracts show the greatest variety, since Brent itself was the marker grade for many years (from about 1987 to 2002 (see 1 below)). Most appear as 바카라 사이트śflat바카라 사이트ť or fixed price contracts, some as a flat price with a differential but this conceals the way that the flat price is agreed between the two trading counterparties. Generally the price agreed today will be based:

  • either upon today바카라 사이트™s Dated Brent (see 2,3 below) price with an element to allow for today바카라 사이트™s market structure (backwardation or contango) out to the delivery date, or
  • upon the price of a BFOE forward month with some element to allow for today바카라 사이트™s market structure between the delivery date and the forward month. Since today바카라 사이트™s dated BFOE price depends upon the prices of the forward months, this is essentially the same calculation, just a bit more elaborate.

The statutory mechanism recognises that the market structure element in the price needs to be reflected in the calculation of the statutory market value on any day. So the statutory method is based upon a daily statutory Dated Brent (BFOET) value, with an adjustment for market structure 14 to 21 days before the NDD to allow for the market structure element in a contract between the date it is agreed and the date of delivery.

14 to 21 days is a representative period reflecting the normal time between a Brent dated contract being agreed and the date of delivery.

Footnotes:

  1. Pages 81 and 119; 바카라 사이트śOil Markets & Prices-The Brent Market and The Formation of World Oil Prices바카라 사이트ť by Paul Horsnell & Robert Mabro .pub Oxford University Press 1993.
  2. BFOE replaced BFO in June 2007. It added Ekofisk blend crude oil to the blends included in the marker.
  3. From 1 January 2018 Troll was added to the basket of BFOE crude grades. This change reflected the potential delivery of Troll along with existing BFOE grades.