TECH NOTES FOCUS ON: BRENT CRUDE OIL ICE NEWS

FEBRUARY 2009
FOCUS ON: BRENT CRUDE OIL
ICE Futures Europe has been home of the Brent Crude futures
contract for more than two decades. The ICE Brent
futures contract has always been financially settled, originally
taking as its basis Brent crude, which is blended
from a group of crude streams within the Brent and Ninian
systems in the North Sea.
In July 2002, the North Sea forward market, on which the
Brent futures contract is based, was modified to include
additional grades Forties and Oseberg, with Ekofisk added
as an additional component in June 2007. This complex
is now known as BFOE — Brent, Forties, Oseberg
and Ekofisk. The physical market for setting the price of
dated Brent or dated BFOE is based upon an assessment
by the price reporting agencies to reflect the most competitive
spot value of Brent, Forties, Oseberg and Ekofisk.
The lowest price is chosen to avoid the potential for adverse
upward price movements as three of the four crude
oils would act as a floating cap. Total daily production
of the crude oils within the BFOE complex are around
1.2-mil barrels per day, compared to daily West Texas
Intermediate (WTI) daily production of around 350,000
barrels per day.
Crude Oil Country API Gravity (º) Sulfur (%)
Brent UK 38.5 0.41
Forties UK 40.3 0.56
Oseberg Norway 37.8 0.27
Ekofisk UK/Norway 37.5 0.24
Source: Petroleum Intelligence Weekly Crude oil handbook 2008
Unlike Forties, Oseberg or Ekofisk, Brent is rarely used by
European refiners: most is transported to and refined in
North America as a gasoline-rich blend.
Dated Brent or BFOE is the benchmark for pricing twothirds
of the world’s traded crude oil by volume. Crude
oil blends as far apart as Russia, Africa, the Middle East
— and occasionally Asia-Pacific — are priced as a differential
to Brent (i.e., Brent plus or minus $1.00). Like WTI,
Brent is classified as a light, sweet blend, which means it
contains higher value hydrocarbons than a heavier crude
oil and is lower in sulfur content (i.e., “sweet”).
Continues on page 2.
TECH NOTES
Cleared PJM options now available on
WebICE and via the broker market
ICE Tip: WebICE now offers GTC orders for
ICE Futures Europe
New OTC Clearing Guide now available
Setup and Maintain YJ Message Consoles,
Distribution Lists and Activity Consoles with
Linked Folders
New Version of ICE Platform Launched
Version 12.200 of the ICE Platform was successfully
launched on January 26. This latest upgrade allows
ICE to move the Henry Hub OTC markets to Trading
Engine and will dramatically reduce round trip times
while increasing throughput in this important market.
It also offers many other enhancements and key architectural
changes that will set the stage for options
upgrades and market data segregation, including enhancements
to clearing administration, WebICE and
ICEBlock, which will be rolled out later in the year.
ICE NEWS
ICE Named 2008 Derivatives Exchange of
the Year by Risk Magazine
ICE Reports Strong Energy Futures Volume for
January 2009
ICE Annual Shareholder Meeting Set for May 14
ICE Achieves Record Volume for 2008
ICE Clear Europe Receives Settlement Designation
from Financial Services Authority (FSA)

ICE IN FOCUS
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FOCUS ON: BRENT CRUDE OIL (continued)
On ICE’s electronic platform, ICE Brent trades alongside
the ICE WTI contract, which is a benchmark contract for
North American crude oil. This enables users to trade the
two largest crude oil futures markets on a single platform.
Because of WTI’s particular suitability for gasoline production
in a region dominated by that refined product, and
because of the cost of freight to pull Brent across the Atlantic
Basin, WTI has historically traded at a $1 to $2 per
barrel premium over Brent.
4
2
0
-2
-4
-6
-8
First nearby spread history for ICE Brent and ICE WTI
history since January 2008
Unlike WTI, which is a pipeline delivered crude stream, the
North Sea grades are all sold on an FOB (Free on Board)
cargo basis, which means the oil is easily sold anywhere in
the world. WTI is a US-domiciled crude oil which cannot
be re-sold into the international market. This means that
Brent is not subject to the same limitations around storage
as WTI, and is more exposed to developments in the
international market.
Recent developments
In April and May 2007, the historical pricing relationship inverted
when a premium began to emerge for Brent against
WTI. This was largely due to storage capacity problems at
Cushing, Oklahoma, which depressed the value of WTI relative
to other crude oils in the US Gulf coast and beyond.
The inversion re-emerged in December 2008 with a surge
in stocks at Cushing and weakening U.S. demand for crude
oil. Cushing oil stocks are 17.7-mil bbl higher than a year
ago and are currently at a new all time high level of 33.5-
mil barrels, according to the latest report from Societe
Generale (US Petroleum Report dated January 28, 2009).
-10
02/01/08
18/01/08
03/02/08
19/02/08
06/03/08
22/03/08
Source: ICE Futures Europe historical data
07/04/08
The duration, depth and size of the premium for Brent
has strengthened into 2009. Since the beginning of December
2008, the front month WTI spread has averaged
-$3.62 per barrel (contango), compared to -$2.43 per barrel
(contango) for Brent.
During the period of the previous price inversion in April
and May 2007, on average, the front 24 contract months
for Brent were trading at a premium to WTI. However,
from the middle of December and into January, the depth
of the inversion extended to an average of around 60 contract
months. With the distortions at Cushing, the International
Energy Agency observed in its January monthly
report that Brent was “arguably more reflective of global
oil market sentiment.”
Continues on page 3
23/04/08
09/05/08
25/05/08
10/06/08
26/06/08
Prompt Brent Spread
12/07/08
28/07/08
13/08/08
29/08/08
14/09/08
30/09/08
16/10/08
Prompt WTI Spread
01/11/08
17/11/08
03/12/08
19/12/08
04/01/09
20/01/09
PRODUCTS & SERVICES
New ICE OTC Cleared Energy Contracts: Print full list
February 13 Launch for Cleared Ag Swaps
NGI Indices to be Exclusive to ICE in May
ICE Announces Third Set of New OTC Cleared Contracts
ICE Launches Dozens of New Cleared Contracts Including
Gas, Heating Oil and PJM West Real Time
ICE’s Product Guide: Specs for all ICE Contracts
NOTE FROM THE ICE HELP DESK
Resolve trade disputes fast. If there is a trade issue, it is
very important for ICE to be able to reach you immediately.
To ensure your information is up to date, simply
left click on “Admin/Edit my contact information” at
the top of your WebICE screen. Then click again on
“information/update” to revise.
When contacting the ICE Help Desk, please have your
ICE User ID ready to provide to the ICE representative.
This will help us resolve your issue as quickly as
possible.
ICE MILLIONS
FX FUTURES
Free real-time
prices
** Note: As of May 1, 2009 ICE will require all WebICE
users to operate with a minimum Java version of
1.6.0_03. Please check with your IT staff to be ready
for this change. The new version will allow ICE to ensure
that customers receive the new functionality and
performance enhancements we strive to deliver.

ICE IN FOCUS
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A WORD FROM JEFF SPRECHER
Recognizing that the financial services sector has faced many
challenges over the past 18 months, I wanted to take a moment
to thank you for your continued business.
While we share our industry’s concern about the broader
business cycle, I am optimistic about the opportunities that
tend to arise amid such challenges. Through your input and
partnership, we have established a marketplace that offers
the transparency, products and stability required to manage
risk in uncertain times. In 2008, ICE reported record contract
volume, Importantly, responding to needs in the marketplace,
we launched a new clearinghouse, introduced a range of new
products and made significant progress in our credit default
swaps strategy. In the first few weeks of this year, we have announced
over 50 new cleared OTC contracts. And this month,
ICE Clear U.S. will be the first U.S. clearing house to clear ag
swap contracts, including sugar, coffee and cocoa.
We’ll continue to strive to lead the industry in growth and innovation
in 2009 and beyond. Thank you for your business,
and please let us know if you have any feedback that might
help us better serve you.
FOCUS ON: BRENT CRUDE OIL (continued)
Through January 28, 2009, ICE Brent futures closed higher
than WTI futures on 31 consecutive trading days. And
on January 15, 2009, the Brent premium reached a record
of $10.58 on an intra-day basis. As the Financial Times observed
on January 18, “This is not the first time WTI has
diverged from other benchmarks, but the discrepancy is
far more severe this time.” In a January 2009 report, Barclays
commented, “…if you want to take a position based
on balances and fundamentals, it is perhaps better for the
moment to stick to Brent or other non-WTI exposure.”
Storage capacity at Cushing is often cited as a limitation
of WTI. Increasing supplies of Canadian crudes have
exacerbated the Cushing issue, as pipelines required to
take crude oil from Canada to the U.S. Gulf Coast have
not been constructed, adding to storage build-ups around
Cushing. Between October 2008 and January 2009, oil
stocks at Cushing more than doubled to 33 million barrels.
With this increase, the pressure on the front WTI intermonth
spread has intensified. The contango for the front
WTI spread fell to -$8.14/bbl on January 15 2009. At the
start of 2009, the front WTI spread settled at -$3.87/bbl.
Differential spreads between WTI and other U.S. Gulf
coast crude oils have also begun to break down. The WTI
spread has reversed against Light Louisiana Sweet (LLS)
and other non-Cushing delivered (and non-exchange
traded) grades against which it usually sells at a premium.
The IEA noted its January report that there is evidence of
traders doing deals on a non-WTI related basis.
Why trade ICE Brent Crude futures
Hedgers, commercials and traders who require exposure
to global economic trends should consider the ICE Brent
Crude futures contract. Brent prices are heavily influenced
by global supply and demand fundamentals. Its liquidity
is ensured by substantial commercial paper. Because it
serves as a pricing mechanism for producers and refiners,
it offers exposure not available in other markets.
Benefits of Brent Crude on the ICE Platform
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ICE Clear Europe offers competitive initial margins and inter-month
spread charges, including a 90% margin offset between Brent and
WTI, the most liquidly traded arbitrage market on any exchange.
Swaps traders in the crude markets can mark to market their positions
against a liquid Brent tradable marker at 16:30 London time.
Because European product prices are set at this time, traders and
refiners who need to lock in a crack spread can do so.
Several Middle East producers use the exchange derived Brent
Weighted Average Price (BWAVE) to price crude oils for European
customers. Customers exposed to the BWAVE price are able to
hedge exposure on a liquid exchange using the liquid ICE Brent
Crude futures contract.
Gasoil Crack: Trading the Gasoil crack will result in two separate
positions in the underlying futures markets for Brent and Gasoil.
The settlement of each leg will be respective expiry of the Brent
and Gasoil futures contracts as made public by ICE Futures Europe.
Upon expiry of the Brent leg, holders of a Gasoil crack trade will
then be left with a long or short position in the Gasoil market which
will then be settled on expiry of the relevant underlying ICE Gasoil
futures contract.
ICE is increasing its OTC Cleared offerings in the Brent market. A
large family of related OTC instruments have emerged that price in
relation to the ICE Brent futures contract. Current products include
Dated to Front-Line swaps, Brent CFD swaps, Dated Brent swaps
and WTI/Brent 1st line swaps as a differential.
For more information, visit ICE’s Product Guide.
Futures style Options on ICE Brent Crude futures are also available
with plans for additional contracts in 2009.
For more information, visit ICE’s Product Guide.
ICE EDUCATION ICE EVENTS QUICK LINKS
Feb 11: Fundamental Analysis - Energy Markets
Feb 11: Electricity Market & Trading Program
Feb 12: Charting & Technical Analysis
View the 2009 ICE Education
Course Calendar
Email education@theice.com
for more information
Feb 8-10: MFA Network 2009 - Key Biscayne, FL
Feb 8-10: 5 Kingsman Sugar Conference, Dubai
Feb 11-13: Western Barley Growers Assoc., Alberta
Feb 16 - 19: IP Week – London
Feb 18-19: OPIS NGL Fundamental Executive
Education Series - Houston, TX
Feb 21-24: Traders Expo - New York, NY
Feb 22-24: Grain World - Winnipeg
CONTACT US
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HOLIDAY CALENDAR
NOTE: On February 16, both ICE Futures
U.S. and ICE Futures Canada will be closed
in observance of U.S. Presidents Day and
Louis Riel Day. Read More.