Question

13 Suppose you are a crude oil trader working for Trafigura. You have just bought the entire stock of an oil tanker (2 million barrels of crude oil) at 59.2 dpb (dollars per barrel). To hedge your position you enter into a 3-year forward contract at 53.8 dpb. However, after three weeks the time basis is trading at -4.5 dpb. What are your mark to market profits in USD? (In case it is necessary express losses as a negative profit, use 2 decimals) If the answer is A,B, C, D, or E, simply type the respective letter in the answer box. If the answer is F, write down the correct answer. A. 1,800,000.00 B. -1,800,000.00 C. 0.90 D. -0.90 E. There is not enough information to answer this question F. None of the above:

Answer 1

Price of the same forward contract 3 weeks later is: 59.2-4.5 = 54.7 dpb

Price of our forward contract is: 53.8 dpb

MTM profit / (loss) per barrel = 53.8 - 54.7 = -0.9 dollar

For the entire quantity it is -0.9 * 2 million = -1.8 million dollar

B is the right option