1. In June, the NYMEX crude oil futures price for West Texas Intermediate for September delivery is $ 47.44 per barrel, while in London on the ICE, Brent blend futures are trading at $ 50.71 per barrel. These futures prices apply to different standardised contracts of course, on two different exchanges, but there will be a correlating relationship between these two different prices.

1. Because this correlation is imperfect, a trader believes the differential between the NYMEX and ICE prices will narrow. In this situation, recommend and justify what trading strategy should be followed.

2. If in August, the NYMEX price has risen by $ 1.10 a barrel, and the ICE price has increased by $ 1.39 per barrel, what profit or loss has been made by a trader who followed the trading strategy? NB. no correlation was provided.