Short Term Idea for WTI/Brent

With current trade tensions between US and China, and the impending supply disruptions of Venezuela, Iran and Libya, the uncertainty is causing oil to whipsaw. I would recommend a small position short on WTI and long position on Brent because the impact on US oil exports to China will create downward pressure while non US oil exporting nations are less likely to be affected by this short term bearish pressure. Instead, Brent is more concerned over whether the increase in production of Saudi and Russia can keep up with supply disruptions of Venezuela, Iran and Libya.

Alternatively, Selling out of the money puts on oil (below 63 dollars a barrel) is generally a safe bet. However, personally I feel that entry into this options trade would be better after the next downward price correction kicks in.

Trade closed manually:

An update of the divergence between WTI and Brent demonstrates a method of profiting in oil trade with limited risk. As of 9:54AM UTC, CLQ8 is -0.14 at 73.96 while BZU8 is up 0.70 at 77.81.

Note: BZU8 and CLQ8 are the equivalent of BZ1! and CL1!, (the futures contract closest to expiry).

I am closing my short on WTI and keeping Brent longs open because I think we could go higher to mid 78s tonight when US market opens.

Trade closed: target reached:

Closing Brent BZU8 at 77.9, notice that CLQ8 is still in the red for the day and actually hit a low of 73 (negative 90+ pips) due to profit taking from last Friday.

Comment:

Closed a tad too early with Brent rallying into the mid 78s, 30 mins after I closed my positions.