The "front month" ICE/IPE contract actually "expires" in the middle of the month prior to the delivery month.
The ICE/IPE contract is a "cash-settled" (ie it is not "deliverable" like, say, the NYMEX WTI contract) contract, and the buyer who still has a contract open upon expiry doesn't get oil from the seller, but a cash amount calculated on the basis of the "Brent 15-day" forward contracts which have traded during the final day of futures trading and been reported by the likes of Platts.
The "15 day" forward contract was developed by Shell a good while ago now, and, unlike the contracts used by many countries, did not have a clause preventing the buyer from selling the oil on.
So a "forward" market in 15 Day contracts then developed, in large part for tax reasons in the early days, and all sorts of games are played as these contracts come to delivery, the delivery "window" at the terminal is allocated, and the cargo became "Dated".
All sorts of fun. Such as "squeezes" when someone tries to buy up all of the deliverable Brent crude oil and then "squeeze" those who have sold oil they don't have...
Then as the contracts went to delivery you would get wonderful things like Brent "daisy chains" when A sells to B and on to C and so on. And "Book Outs", when a cargo nomination passes down a chain and comes back to the guy who sold it.
"Trading the tolerance" (ie delivering as much more or less as you could get away with: the "delievery tolerance" used to be + or - 5% which was + or - 25,000 barrels, but has since come down to + or - 1%) depended on whether the market was rising or falling.
It is the transactions in "Dated" Brent cargoes - with prices reported to and/or assessed by the major oil price reporter,Platts - which are actually the basis of much global crude oil pricing.
There is a "basis risk" between this price and the futures prices used for hedging, and sophisticated trading and tools such as "Contracts for Difference" are used to manage this risk covering the period between the expiry of the futures and the actual Date of loading.
So in a nutshell, the prices are related pretty imperfectly, and traders will play games.
HiD could give you chapter and verse from a trader perspective: I used to enjoy it immensely since I wasn't responsible for it at the IPE - the FSA was, nominally, insofar as UK players were involved, but as far as I know never even smacked anyone's wrists.
What went on in the IPE Gas Oil market deliveries on the other hand - I could write a book about that..... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
