how can a basis swap be used if heavy crude oil price is also going to rise (less than brent oil) but still it is a rise…
the answer says that we should hold a short position for heavy crude oil
please explain why?
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Jai, read the highlighted portion carefully, it says brent crude oil price is going to rise more than heavy crude oil & therefore, a basis swap where you go long on brent & short on heavy crude oil.
I hope now it gets clear to you. Thank you!