Slide 20 of 25

Notes:

• Differentials clearly fell during 1997, and we expect the general trend over the course of 1997 and 1998 to be down, in spite of a brief upturn in early 1998.

• Crude prices have fallen dramatically, which tends to pull the light-heavy quality differential down.

• Residual fuel prices have moved closer to crude oil prices (with a brief backslide this last winter due to warm weather and high stocks). Residual fuel prices moving towards crude oil prices also tends to contract the differential.

• Asian demand for light products fell back in 1997 and remains low in 1998, which should narrow the differential as the prior Asian volumes flow back into the Atlantic Basin markets.

• But the world is experiencing a large supply of heavy crude oils relative to light, which expands the differential.

• Also, light product prices are showing unusual price strength in this weak crude market -- as a result of a good economy and high refinery capacity utilization. This light product market strength also tends to expand the differential.