By Harmeet Kaur, CNN
(CNN) — This week, as the US and Israeli war against Iran continued to expand across the Middle East, traders and analysts have been fretting about “Brent” as if he’s an old, wayward friend: “Brent” got the highest anyone had seen in years on Monday. Later in the day, “Brent” fell hard, inched back up and then got knocked down again on Tuesday.
It’s only Wednesday! Poor “Brent.” He’s really had a rough go of it lately.
For those who don’t make a habit of following oil markets or commodities trading, “Brent” — or Brent crude — typically refers to the crude oil price benchmark most widely used by buyers and sellers around the world. Brent, which sets the price for most of the world’s traded oil, is considered the global standard; West Texas Intermediate, or WTI, is another benchmark used for US crude oil.
But oil prices are complicated, perhaps none more so than Brent. The war in Iran is only adding to the confusion.
First, some tangible facts: Brent crude oil was originally the name of the oil that Shell UK extracted from its undersea Brent oil field, a joint venture with Esso located off the northeastern coast of the UK’s Shetland Islands. The oil field was named, in turn, for the “brent goose” under Shell UK’s convention of naming its oil fields after an alphabetical sequence of water birds — Brent, discovered in 1971, was preceded by Auk and followed by Cormorant.
The brent goose, also known as the brant goose or just brant, is a small, short-necked waterfowl that visits the British coasts in the winter. A longstanding but lexicographically unproven theory holds that, centuries before its arbitrary association with fossil fuel, the bird was named after the word “brand,” as in “firebrand,” for its smoky coloring. While “brant” was the more common variant in the 1500s and 1600s and remains so in the US, English authors began opting for “brent” around the late 1700s, according to the Oxford English Dictionary.
Through the years Brent, the oil, developed into something more rarefied and abstract than the output of one petroleum deposit. When Shell’s output from the Brent field began trading on the market in the 1980s, it was a useful point of reference for traders and speculators. Brent oil’s origin in the North Sea made it easy to transport to Europe, Africa and the Middle East, says Adi Imsirovic, an experienced oil trader and editor of the 2023 volume “Brent Crude Oil: Genesis and Development of the World’s Most Important Oil Benchmark.”
That predictability and visibility helped establish Brent as the world’s premier oil benchmark, Imsirovic says. The price of other grades of oil around the world is calculated by taking the price of Brent as a starting point.
But around 1990, with the demand for crude oil ever growing, the Brent field started to run out of oil, which constrained trading. By then, though, Brent was not just a supply of the raw material for powering automobiles or heating houses; a complex of markets in oil futures and forward trading had grown up around it, providing useful risk management tools to the oil industry, says Liz Bossley, who has traded crude oil since 1978 and is currently CEO of Consilience Energy Advisory Group.
There was incentive to keep all this going, so the definition of what could be bought and sold as Brent expanded to include new oil grades from different oil fields across the North Sea.
The last of the Brent field’s four platforms stopped operating in 2021. Today, Bossley says, Brent is no longer an oil but “a brand name for a suite of contracts, dated, forwards, futures, swaps and options … It’s like Coke or Pepsi or