It is April 15, 2020 now. A company knows that it will need to purchase 30,000 barrels of crude oil sometime in June. The current May oil futures price is S25.00 per barrel and the current July oil futures price is S27. On June 11, the spot oil price is $28 per barrel and that is the time you decide to take oil position (one oil futures contract 1.000 barrels) and July futures price is $29.

1. What futures contract should be used for hedge purpose?

b. What will be the net cost of oil if you take a long position in July oil futures contracts on April 15, 2020