Feras - We have purchased 3000 NYMEX June Sweet Crude Oil...

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We have purchased 3000 NYMEX June Sweet Crude Oil contracts for consumption during the month of May. Therefore we have liquidated these contracts during the month of May at the following dates and price. However, before considering the liquidation strategy we analyze the key points of the contract and our liquidation strategy. Expiry of June contract = Third business day prior to the twenty-fifth calendar day of May month, which is 20 th May Volume in each contract = 1*1000*42 gallons = 42,000 gallon Total oil purchased in future = 42,000* 3,000 = 126 million gallon Existing inventory = 24 million Total Fuel available = 150 million gallon (126 + 24) Total fuel required = 88 million (non hub) + 62 million (hub) = 150 million gallon Daily fuel required at non-hub airport = 88/31 = 2.84 million or 67.6 contracts Daily fuel required at hub airport = 62/31 = 2 million or 48 contracts The company is already having 24 million of fuel inventory at its hub airport and 126 million of inventory in the future contracts, which fully cover the estimated fuel consumption for May month, considering the full month consumption of 150 million. The fuel requirement at hub airport will be first utilized from the existing inventory and thereafter from the purchase from the market. The existing inventory is expected to be used for first 12 days (24/2) of month.

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This note was uploaded on 12/04/2011 for the course ECONOMICS 201 taught by Professor Rcollier during the Spring '10 term at Portland CC.

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Feras - We have purchased 3000 NYMEX June Sweet Crude Oil...

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