Slide 10 of 15

Notes:

• OPEC production cutbacks have caused stocks worldwide, including those in the U.S., to be drawn down to very low levels. This imbalance has been behind the climb in crude oil prices this year.

• In particular, refiners drew distillate stocks down in the fall (along with crude oil and other products), rather than build, as crude supply lagged and margins were squeezed by high crude oil prices.

• We are now in the middle of winter -- the usual high point in world demand -- with low stocks. Late in 1999, OPEC had been indicating it might relax its production quotas if stocks reached 1996 levels, but in early January, members indicated they intended to maintain their cutbacks at least through March, and possibly through June or later. This firm stance along with cold weather increasing demand is behind the recent crude price surge. WTI broke $30 per barrel January 25, but eased back later during the week as OPEC gave new signs it might ease up on the cutbacks in March.