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Crude gets interim strength but dips below $30 on the cards

The march Brent contracts (BRG2016) were up at $37.13 a barrel.

U.S. oil futures had jumped from $27 dollars a barrel soon after yesterday is inventory check, but the slumps towards 27 should not be ruled out and get bull trapped this slumps resembled for the first time ever since 2003, caught in a broad slump across world financial markets as investors worried that a huge oversupply in crude was coinciding with an economic slowdown, especially in China.

Kudos for short term bulls...! China being the 2nd largest country to import oil, in last month their imports have surged by 9.3% from a year earlier to 33.19 million tons, corresponding to 7.82 million barrels, enabling fears over fading demand prospects from the Asian nations.

Freezing weather conditions and snowstorms in the U.S. East Coast and parts of continental Europe, boosted demand for heating oil and helped strengthen oil.

We think the major driver for crude's strength is attributed Chinese surged imports but the cold weather in North America and Europe follows an extremely mild start to winter in large parts of the northern hemisphere, which had dampened oil consumption.

So from current levels with hedging mindset we recommend shorting mid-month futures for target towards $25. Light Sweet Crude Oil (WTI) futures and options are the world's most actively traded energy product. WTI plays an important role in managing risk in the energy sector worldwide because the contract has the most liquidity and most transparency.

If puts are overpriced relative to calls, the arbitrager would sell a naked put and offset it by buying a synthetic puts. Similarly, vice versa when you think calls are getting overpriced in relation to puts.

Arbitration can also possible through box spreads where buying debit call spreads and debit put spreads for a risk-free returns. The opportunity for arbitrage in options market exists once in blue moon for individual investors as price discrepancies often appear only for a few moments.

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