How to Invest in Brent Crude

Offshore oil rigs pump Brent crude from the North Sea seabed.

Offshore oil rigs pump Brent crude from the North Sea seabed.

Brent crude, also known as London Blend, is found in the North Sea between the British Isles, Scandinavia and mainland Europe. Brent crude is used as a benchmark to price two-thirds of the world’s internationally traded crude oil supply. Brent crude is refined into gasoline and is western Europe’s primary supplier. You can add Brent crude to your portfolio by trading it on the commodities exchange or investing in options or exchange-traded funds.

Trade Brent crude commodity futures contracts if you want to trade the actual barrels of oil. Brent crude is traded on the Chicago Mercantile Exchange -- or CME Group exchange -- as "BZ" and on the Inter Continental Exchange (ICE) under the symbol "B." One Brent crude contract controls 1,000 barrels, or 42,000 U.S. gallons, of oil. Brent crude is quoted in U.S. dollars and cents per barrel. A one-cent price move up or down is worth $10 per contract.

Deposit the initial margin amount required for each Brent crude futures contract you want to trade. The amount of margin depends on how much time remains until the futures contract expires. As a general rule, the more time until expiration, the less margin you must deposit. For example, the initial margin deposit can range from $3,099 to $4,800, depending on the contract. Your futures broker will tell you the exact amount you will need to deposit.

Lower your trading risk by investing in Brent crude commodity futures options. One Brent crude option controls one Brent crude commodity futures contract. One option gives you the right, but not the obligation, to buy or sell one Brent crude commodity futures contract at a set price before expiration. If you buy a call option, you make a profit when the option price rises. If you buy a put option, you profit when the price of the option falls. You can trade Brent crude futures options by opening an account with an options trading brokerage firm.

Invest in an exchange-traded fund, or ETF, that tracks the price movements of the Brent Oil Fund. ETFs are securities that copy the price movements of an index fund, a single index or a commodity. The United States Brent Oil Fund (NYSE: BNO) is an ETF that tracks the Brent Oil Index and seeks to replicate its price moves on the ICE exchange. You can trade ETFs through your online stock trading account or through your stockbroker.

Tip

  • Open a free demonstration account to practice trading before risking your real money.

Warning

  • A number of factors, including weather and political turmoil, can instantly affect Brent crude prices. Only trade with money you can afford to lose.

About the Author

Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.

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