Brent prices: Impact of PRA methodology on price formation
Oil prices are largely formed at the junction of the financial sphere and the physical sphere. This is particularly true for the main markers, such as Brent prices. The term “Brent prices” may refer to several type of contracts (see, for example, Bossley 1999) traded by physical and financial participants. The main contracts interacting in the Brent sphere are ICE Brent futures contracts, Dtd. Brent, Forward Brent and Brent CFDs. In this article we look at the interaction between these contracts, resulting in part from the price assessment methodology of Price Reporting Agencies (PRAs). Our conclusion is that changes in PRAs methodology in the past ten years, first aimed at avoiding price manipulation, today can guarantee an anchor to the physical market for oil prices.