Praveen: While reading the news a few days ago, I came to know that the Dated Brent price touched an all-time high of $145 a barrel. It felt odd. As I’ve been tracking oil price since the US-Iran war began, I knew very well that crude was trading just under $100. I checked on Google to make sure, and crude was trading at only $96 a barrel. What is this ‘Dated Brent’ and why is its price different?
Naveen: What you checked on Google is the futures price of Brent crude and what was reported in the news is the price of Dated Brent, which represents the actual price refiners are paying for oil in the physical world — also known as spot market price. This Dated Brent price is also the primary global benchmark for physical oil trades.
Brent as you would know is a grade of light crude oil extracted in the North Sea that is easy to refine, but, would you like to know why it’s called ‘Dated’?
Praveen: Yes, I’m all ears.
Naveen: You see, crude is transported by oil tankers around the world, and is loaded on to them at a place called the ‘loading terminal’.
Based on availability, the terminal operator would give a 3-day loading window/slot to the oil producer.
During these days, the oil buyer has to send a ship to collect the oil. This dating process is by which it came to be known as ‘Dated Brent’. There is one more nuance I would like you to know. Today, Dated Brent is at $113. What this represents is the price of oil that will be loaded on to a tanker (at a terminal) 10-30 days from today, and from there delivered at a later date at the buyer’s location. It is not the price of oil being delivered today.
Praveen: Why is it so?
Naveen: Once the seller notifies the loading window dates to the buyer, the buyer will certainly need some time to charter a vessel, arrange insurance and so on. This 10-30-day time-gap is to let the buyer arrange these.
Praveen: I see. Now tell me how I can check this Dated Brent price.
Naveen: Unlike Brent futures which are traded on exchanges, Dated Brent is not, and is instead an assessment made by agencies such as Platts (S&P) and Argus Media.
These are not available freely in public sites unless reported in the media.
Praveen: Why was Dated Brent at $145, when futures were trading at $96?
Naveen: Here some nuances must be understood. The $96 a barrel you mentioned — that’s actually the price of June ICE (Intercontinental Exchange) Brent futures in early April. These futures, are just paper trades settled in cash and entail no physical delivery of crude (unless coupled with EFP-discussed here). These primarily serve as a tool for price discovery and are used for hedging and speculation alike. June futures were at least 70-80 days out in the future, while Dated Brent captured prices of crude that would be loaded on to tankers in the next 10-30 days and thereby, those transactions close by mid-May latest.
With a lower price than the spot market benchmark, the futures market expected the acute oil deficit to ease substantially by June. That’s the interpretation for the difference that you asked.
Praveen: Interesting. But this is my understanding of futures. Futures are basically derivatives deriving their value from the underlying. Crude is the underlying here. Shouldn’t they move in tandem with the physical market? Won’t such a large gap between futures and spot price give rise to massive arbitrages?
Naveen: Futures eventually have to converge with physical prices and there are three ways this could happen.
But before that, bear with me as I take you on a little detour to the forward market. While the futures market is meant for financial or mere cash-settled trades, the forward market is meant for traders who want to take/give physical delivery of crude. Here, the 25-day BFOET forward market happens to be the benchmark and a reference for Dated Brent prices as well. BFOET refers to North Sea crude grades namely, Brent, Forties, Oseberg, Ekofisk and Troll.The ‘25-day’ period refers to a mandatory 25-day notice a seller of the forward has to give the buyer before the first day of the 3-day loading window. Again, this is to let the buyer arrange logistics.
The front month forward contract as of today, is the June forward. June, here, refers to the delivery month or the month in which crude will be loaded on to a tanker.
However, trading for June forward expires by the end of April itself! This is so structured to accommodate the 25-day notice period, even for contracts struck in the end of April. May will serve as the gap month for the June forward.
When April ends and rolls over to May, the delivery month also rolls a month forward to July — meaning, for contracts traded in May, deliveries will happen in July, so on and so forth.
With me so far?
Praveen: Oh yeah. Now tell me how the convergence happens between futures and spot price, in the three ways you mentioned.
Naveen: The first is through an exchange settlement mechanism. In case of futures traders on ICE who hold their positions open until expiry, the exchange will publish the ICE Brent Index on the business day following the expiry day and this is the price such traders have to use to square off their positions. For instance, in case of June futures, the expiry day will fall on April 30, and ICE Brent index value will be published on May 1.
Praveen: Got it. So, how does this index help futures and spot prices converge?
Naveen: The answer lies in the index’s methodology. It’s a bit complex but you can understand that the index largely derives its value from the forward market, I told you about.
For example, ICE Brent index for June futures (April expiry) will largely derive its value from the prices of June forward contracts. As we near April-end, the prevailing Dated Brent and forward prices will have a bearing on this index. The index, thus deriving its value, aids the futures market converge with the spot market.
Look at it this way. There is a futures market which involves financial speculators. There is a physical market that involves taking delivery, reflecting real demand and supply. These tend to converge as we near expiry.
Praveen: Understood. What are the other two ways?
Naveen: The second way addresses your question about arbitrages. When traders spot large differences between the futures and physical forward market prices, they buy the undervalued futures and simultaneously sell a forward (which trade higher) in the physical market. Now, there is a derivative instrument called EFP (exchange for physical) which lets a futures trader swap his paper long futures position for a physical long forward contract, but at a swap cost. The trader can then square the long and short physical forward positions and pocket the gain (cash settled in general, as these are essentially arbitrage trades). However, when arbitrage windows emerge, traders flock to buy futures in large quantities — thus taking futures price closer to that of physical forwards.
The third way involves a short squeeze.
Traders holding short positions in the futures market face risk of losses if the physical market disconnects to the upside, making no sense to hold on till expiry. When a large population of such traders buy futures to cover their shorts, it triggers a short squeeze, pushing futures price closer to physical market price.
Praveen: I see. You mentioned Dated Brent is at $113 today, having fallen from $145 a couple weeks ago. What explains this?
Naveen: A reason why this could be so is that since the ceasefire was announced, military attacks have largely stopped and that could’ve helped spot prices cool. However, the ongoing blockade, production shut-ins in West Asian countries and depletion of high sea inventory haven’t yet eased the flow of crude. Despite this, spot prices have fallen. There could be one possible explanation — demand destruction i.e., demand for crude is coming down due to high prices.
Praveen: That is bad news for economic activity and the stock markets, isn’t it?
Naveen: Possibly. That makes it all the more important for investors to keep a close eye on this interplay of crude futures and the physical market.
Published on April 25, 2026
