12) Suppose that it is January. You are a petroleum refiner. You want to hedge your production margin. For the sake of this problem, assume that for each barrel of crude oil that you buy in April, your refinery produces one barrel of diesel fuel that you sell in May. You are concerned that, over the next three months, crude oil prices will rise but prices for the diesel fuel that you sell will rise more slowly or stay level. Yourproduction margin per barrelequals sale price per barrel of diesel fuel minus purchase price per barrel of crude oil. If your forecast is correct, then your production margin will decline.

You think that the spread between May crude oil futures and June ULSD (diesel fuel) futures will decrease over the next two months. Thus, if you set up aspread strategyin which your company islong one crude oil futurescontract for each ULSD futures contract that it is short, then you can hedge your production margin.

Note: keep in mind that the spread per barrel in this strategy has the same magnitude but the opposite sign of corresponding production margin.

The underlying asset for crude oil and ULSD futures contracts is 1,000 barrels per contract.

Here is the price data for January when you open both contracts:

• May crude oil futures: $64.67 per bbl.
• June diesel fuel futures: $82.57 per bbl.

Here is the price data in April when you close out both contracts:

• May crude oil futures: $81.25 per bbl.
• June diesel fuel futures: $91.19 per bbl.

What is your profit or lossper barrelon the futures strategy(ignoring taxes and commissions)? Enter your answer to two decimal places. If a loss, then enter it as a negative number.

Caution: we always calculate spread per unit as price of long position minus price of short position.