Query on Commodities Hedging


I've been studying how merchants can hedge flat worth publicity when buying/promoting crude oil with crude futures. One thing doesn’t add as much as me. If you are going to buy crude, do you hedge by promoting or shopping for futures?

Instance: Let's say I’m a Trafi/gunvor/glencore dealer. For example, I enter into an settlement to buy 1000 crude barrels from West Africa for supply in two months on the Brent worth in 2 months – $2/bbl differential. Present spot crude buying and selling at $70/bbl. Let's say I hedge my publicity by promoting futures for supply in 2 months at $71/bbl.

In 2 months time, after supply of crude, 2 eventualities.

  1. Spot crude trades at $75/bbl. I buyback my futures at $75/bbl. My complete value = $81/bbl (75+4)
  2. Spot crude trades at $65/bbl. I buyback my futures at $65/bbl. My complete value = $59/bbl (65-6)

How does this add up. I’m not hedging any publicity right here. Shouldn't I be shopping for crude futures (and promoting futures subequently) once I buy crude and promote crude futures once I promote crude (and buyback futures subsequently)?

FYI that is from an article on danger administration by Trafi which is inflicting me all this confusion.

https://preview.redd.it/z5k0j9cxea0e1.png?width=692&format=png&auto=webp&s=7c743cd2be0f91d3bae0d1174fe87686e72300b5

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