IPE Brent Crude Delivery Mechanism

Unit of trading

One or more lots of 1,000 net barrels (42,000 US gallons) of Brent crude oil.

Specification

Current pipeline export quality Brent blend as supplied at Sullom Voe.

Cessation of trading

Trading shall cease at the close of business on the business day immediately preceding the 15th day prior to the first day of the delivery month, if such 15th day is a banking day in London. If the 15th day is a non-banking day in London (including Saturday), trading shall cease on the business day immediately preceding the first business day prior to the 15th day. These dates are published by the Exchange.

Delivery/settlement basis

The IPE Brent Crude futures contract is a deliverable contract based on EFP delivery with an option to cash settle against the published settlement price i.e. the IPE Brent Index price for the day following the last trading day of the futures contract.

If the contract is to be subject to the cash settlement procedure notice must be given (in accordance with LCH.Clearnet procedures) up to one hour after cessation of trading.

The IPE Brent Index

The Exchange issues, on a daily basis at 12 noon local time, the IPE Brent Index which is the weighted average of the prices of all confirmed 21 day BFO deals throughout the previous trading day for the appropriate delivery months. These prices are published by the independent price reporting services used by the oil industry.

The IPE Brent Index is calculated as an average of the following elements:

1. First month trades in the 21 day BFO market. IPE/Brent Crude Futures Contract Spec/3.

2. Second month trades in the 21 day BFO market plus or minus a straight average of the spread trades between the first and second months.

3. A straight average of all the assessments published in media reports.

Payment

Payment for contracts subject to the cash settlement procedure takes place through LCH.Clearnet within two business days of the cessation of trading.

Exchange of Futures for Physical (EFP) and Exchange of Futures for Swaps (EFS)

EFPs or EFSs may be reported to the Exchange during trading hours and registered by LCH.Clearnet up to one hour after the cessation of trading in the delivery month in which the EFP or EFS is traded. These allow more effective hedging opportunities for market participants with over-the-counter positions.

The contract is governed by English law and includes provisions regarding force majeure, trade emergency and embargoes.

Source: IPE.

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