Today is January. A refinery takes a long position in 198 June crude oil futures...
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Today is January. A refinery takes a long position in 198 June crude oil futures contracts at a futures price of $97 per barrel (abbreviated bbl.) The objective is to hedge price risk of future purchases of crude oil. The spot price of crude oil currently is $92 per bbl. In May, the refinery offsets (i.e., closes out) its futures position by taking a short position in the same number of June crude oil contracts at a futures price of $86 per bbl. The spot price in May is $0.10 per bbl. below the futures price. What is the refinerys total gain or loss on its futures position? Ignore transactions costs. The size of the crude oil futures contract is 1,000 bbl.
Enter your answer in dollars without the $ symbol. If the trader has a loss, then enter a negative number, e.g., -3456.78 (i.e., a loss of $3,456.78). If a gain, then enter an unsigned value, e.g., 1234.50 (i.e., a gain of $1,234.50).
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