Several countries have already stepped in to help airlines that have seen demand decimated almost overnight by the coronavirus outbreak, with the United States offering $58 billion in aid. Qatar Airways is one of few airlines continuing to maintain scheduled commercial passenger services. Thus Qatar expects to purchase two million gallons of jet fuel in six months and decides to use heating oil futures for hedging.

Question

a. What risk exposure does Qatar have? What position should it take if Qatar wants to use heating oil futures to hedge the exposure?

b. The heating oil futures contract size is 42,000 gallons per contract, what is the optimal number of futures contracts with no tailing effect?