With increasing technology comes greater opportunities for the individual to actively participate in what has become known as a global market. Of great interest here is the commodities sector which is not only an economic barometer that can determine the potential direction of the global economy itself, but also underpins a segment of the market which has experienced a great deal of interest due to specific advantages over traditional stock purchases. Of particular relevance is when we examine Brent Crude oil and its relationship to commodities trading.
Brent Crude is one of the two most heavily traded contracts on oil; the other being West Texas Intermediate, or WTI. Brent is considered a “light and sweet” crude and is derived from fifteen different fields within the North Sea. It is of great importance to the manufacturing processes of gasoline and petrochemical byproducts, these thereafter being largely consumed in northwestern Europe. The prices of oil form both Europe and Africa are often based on the difference between their value and the price of Brent. This type of crude is valued in US cents and may see typical movements per day of 100 to 150 points, allowing for volatility but also quite substantial returns. When trading Brent Crude, one can exercise the option to trade on what is called a daily futures plan, or conversely base an investment on what the price is speculated to be at a future date.
As opposed to buying shares, trading Brent allows for two distinct rewards. Not only can one profit from falling prices by selling as opposed to buying, but one can also “leverage” a holding; essentially having the ability to buy comparatively large quantities for a fraction of the price. The result is the possibility for a substantial profit in comparison to an otherwise small fluctuation. While this may seem inherently risky, by placing stop losses on a certain position, one can mitigate any damage that may be incurred by an unexpected event. Similarly, one can place a “limit” on a position to sell once a target has been reached. As most Forex brokers allow positions for the trading of Brent Crude, establishing an account is a simple process.
The other consideration is this oil’s direct relationship to the production and consumption of gasoline. Gasoline prices may rise significantly during an unseasonably cold European winter as well as in the summer months when tourists take to the roads. Finally, the oil fields which supply Brent Crude are in a geo-politically stable region of the world; there is little if any concern of trade disputes or regional conflicts as have been witnessed in the Middle East. By having these aforementioned attributes, Brent Crude can be a welcome addition to any actively trading portfolio.
European and African countries tend to use brent oil instead of crude oil.